Southwest Airlines Faces Headwinds Amid Boeing Challenges
Southwest Airlines (LUV) faced a 5% stock decline due to increased operating costs that outpaced the company's turnaround initiatives. JetBlue Airways (JBLU) raised similar cost concerns earlier in the week.
CEO Bob Jordan expressed optimism despite short-term obstacles, citing progress at Boeing (BA), Southwest's fleet partner. Jordan anticipates improved Boeing production following the strike resolution, although constraints could take years to fully address.
Boeing's steady recovery is crucial for Southwest, as it operates an all-Boeing fleet. Delivery delays have impacted Southwest's capacity and efficiency, a challenge shared by the industry.
Jordan projected Boeing's 737 production to exceed its initial target of 38 aircraft this year, potentially reaching 55. Bank of America analyst Ron Epstein echoed this sentiment, highlighting gradual production ramp-up.
Boeing CEO Kelly Ortberg indicated that the company might surpass its production target of 38 737s per month, potentially reaching 42 by year-end.
A rebound in Boeing production would support Southwest's efforts to mitigate cost pressures. Jordan noted strong consumer demand and the implementation of cost-cutting initiatives, including partnerships and strategic alliances.
Despite recent challenges, Southwest shares have gained 8% since the announcement of its turnaround plan in September.