LUV - Embedded Expectations Analysis - 2020 11 23
Southwest Airlines Co. (LUV:USA) currently trades at a premium relative to UAFRS-based (Uniform) assets, with a 1.4x Uniform P/B. Even at these levels, the market is pricing in bearish expectations for the firm, and management may be concerned about capacity utilization, demand, and their recent initiativesSpecifically, management may lack confidence in their ability to meet their Q4 2020 outlook, obtain customers, and improve operating revenues. Management may also have concerns about the repercussions regarding their recent middle seats policy. Furthermore, they may lack confidence in their ability to recover quicker than their competitors, effectively adjust their flight schedules to match demand, and increase available seat miles (ASM). They may also have concerns about the continued declines in both passengers and fares, sustainability of bookings demand, and the impact of limited Thanksgiving flights on their business
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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