LUV - Embedded Expectations Analysis - 2020 05 29
Southwest Airlines (LUV:USA) currently trades below recent averages relative to UAFRS-based (Uniform) assets, with a 1.1x Uniform P/B. At these levels, the market is pricing in bearish expectations for the firm, and management may be concerned about passenger safety precautions, their airplane fleet, and reduced flight demandSpecifically, management may be overstating their ability to retire airplanes, the historical outperformance of low-cost airlines through recessions, and the potential for passenger health screening at airports. In addition, they may have concerns about the feasibility of voluntary temperature checks and optional facemasks for passengers, their ability to apply disinfectant monthly to every aircraft, and their ability to enforce social distancing techniques. Furthermore, they may be concerned about the use of long-term aircraft storage to manage flight activity reduction, the progress of MAX airplane deliveries, and shortened operating days
Southwest Airlines operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. The company has Boeing 737 aircraft in its fleet and serves destinations in various states, the District of Columbia, the Commonwealth of Puerto Rico, and other near-international countries such as Mexico, Jamaica, The Bahamas, Aruba, Dominican Republic, Costa Rica, Belize, Cuba, the Cayman Islands, and Turks and Caicos. The company principally provides point-to-point service, which allows for direct nonstop routing. The company also provides a suite of digital platforms to support Customers' needs prior to and during the course of their travel.
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