More on LUV--
| Southwest Airlines' Bookings Have Stalled. The Stock Is Up Anyway. -- Barrons.com |
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| Dow Jones Newswires August 19, 2020 10:19:00 AM ET
Southwest Airlines updated its plans to adjust its capacity Wednesday morning. The news isn't great.
"The Company was encouraged by improvements in May and June 2020 leisure passenger traffic trends, compared with March and April 2020," reads a securities filing from the airline. "However, the improving trends in revenue and bookings stalled in early July 2020, and remained depressed for the remainder of the month, due to the rise in Covid-19 cases."
The airline mainly flies domestically, making it a good proxy for trends in the overall U.S. industry.
August demand has shown "modest improvement" but remains down a lot year over year. Southwest (ticker: LUV) said its August sales should be down 70% to 75% year over year. Capacity will drop about 27%. Planes will be 40% to 45% full.
Looking further out, Southwest plans to cut September capacity by between 40% and 50%. Before Wednesday's update, the airline was hopeful that capacity would only need to drop 20% to 25%.
The declines are breathtaking, but they are also unsurprising. In fact, Southwest stock was up 4.4% in early trading Wednesday, despite the bad news. Shares remain down about 30% year to date.
Stock in major U.S. airlines is down about 50% year to date, on average, far worse than the comparable returns of the S&P 500 and Dow Jones Industrial Average over the same span.
Southwest's update means its shares, along with stock in other airline and travel companies, will probably bounce along the bottom until some larger improvement to the overall situation emerges. That might come in the form of a vaccine. Pivotal data from Phase 3 trials is due from several companies by the end of the year.
2020 has been a lost year for travel demand. Passenger traffic in the U.S. is down roughly 80% year over year since the president declared a national emergency due to Covid-19 in March.
Traffic declines bottomed out in April, down 95% year over year, and have improved since then. But so far in August, traffic is down 72%, a tiny improvement from the 74% year over year drop in July.
Southwest says bookings for September are down between 65% and 75%. The midpoint, 70%, is another improvement from August, albeit a painfully small one.
Write to Al Root at allen.root@dowjones.com |
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