Southwest Airlines has announced that Friday will see a return to the normal flight schedule
Yahoo Finance Live anchors Brian Sozzi and Brad Smith discuss the decline in stock for South Airlines amid holiday travel chaos, as well as the airlines’s plans to return to a normal flight schedule on Friday, December 30.
Video Transcript
BRIAN SOZZI Let’s see, there is one energy dependent sector: the airlines. After a rough few days that saw thousands of flights cancelled, we are also monitoring shares of Southwest. CFRA analyst says this is unlikely to have any long-term impact. Southwest states that it plans to resume its normal flight schedule immediately.
Just reading this note from CFRA, Colin Scarola, an analyst. He really cut his earnings estimates for next year, or, actually, the fourth quarter, to 120, instead of 186. That was his full-year estimate. A major reduction was due in large part to the fourth quarter profit loss.
Yesterday, you may recall that I suggested Ed Bastian, Delta CEO and Robin Hayes, JetBlue, should write an editorial and tell us why they are different than Southwest. Scott Kirby did, however, do this yesterday on his Instagram. He stated, “You know what guys?” During this entire storm, we were the most efficient airline. He admitted that we weren’t perfect but he thought they did a great job. Scott is right, judging by their cancellations and the debacle at Southwest.
BRAD SMITH Yes, Southwest had released late yesterday what I believe was the continuation of operation 1/3 of their schedule from Thursday, December 29. They expect to resume normal operations with minimal disruptions on Friday, today, and December 30. They are also expressing their satisfaction with the progress made to realign their crew.
However, this company will need to make significant investments to gain real-time insights into the crew’s location. This includes where they are in flight, transiting to another place, and where they need to connect to make another flight possible.
BRIAN SOZZI Ah, I’ll add that, too. That CFRA call is not something I like. I can understand their point of view. However, this news should cause you to pull your stock back. It would seem like it could be a buying opportunity. You don’t know the long-term consequences of this situation. It’s clear that it has a significant impact on earnings in the fourth quarter. But how long will this effect continue into next year. It’s difficult to predict. As an analyst in the past, I would not hesitate to say that it is difficult to model these situations. They are truly the great unknown for companies.
BRAD SMITH It is. It’s not easy. The other important thing is to remember consumers will continue to search for deals even during economic downturns. So they won’t be as airline-agnostic if they don’t have certain points or rewards or a loyalty programme that they’ve been signed up for. Instead, they’ll just look for bargains. They will search for the lowest prices. Price competition or buying based solely on price is no longer a priority.
This is where the inclination to write this note comes in. It looks at Southwest’s opportunity in those environments where there was a significant pullback. You know what? I don’t fly Delta or United Airlines. I will fly any airline, as long as they are cheap.
BRIAN SOZZI All these people who got stuck in airports were there because they got…
BRAD SMITH Yeah, it’s frustrating.
BRIAN SOZZI Southwest has taken them to the woodshed, and they will be moving online for the holiday season 2023. They might see an open flight from Southwest. And what do you know? I don’t fly this airline. I don’t fly with this airline.
BRAD SMITH Yes. I feel the same way with one.