LUV - Embedded Expectations Analysis - 2021 05 13
Southwest Airlines Co. (LUV:USA) currently trades at a premium relative to UAFRS-based (Uniform) assets, with a 1.4x Uniform P/B. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about pent-up travel demand, flight planning initiatives, and the MAX aircraft's performanceSpecifically, management may lack confidence in their ability to sustain fuel efficiency gains, capitalize on pent-up leisure travel demand, and further execute their flight planning and fleet modernization initiatives. Additionally, they may have concerns about the implementation of the Sabre GDS platform and its impact on customer relationships. Management may also lack confidence in their ability to open more destination stations, fill Boeing MAX seats to full capacity, and execute an all-new maintenance recordkeeping system for their Boeing 737-700s. Furthermore, they may have concerns about the sustainability of MAX's performance and inconsistencies in MAX's electrical systems
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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