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Key Takeaways
- Southwest Airlines and American Airlines Group issued warnings about their financial results, sending shares of both sinking.
- Southwest said it would be hurt by the arrival of fewer-than-expected deliveries of Boeing jets.
- American explained that higher fuel prices will increase its current-quarter loss.
Shares of Southwest Airlines (LUV) and American Airlines Group (AAL) fell Tuesday as problems with Boeing (BA) jet deliveries and higher fuel prices, respectively, are expected to affect their results.
Southwest announced that it will have to cut capacity and reduce its outlook because it will receive fewer Boeing jets than anticipated this year. Southwest explained that the plane maker, which is the airline’s sole supplier, has advised the carrier that it should anticipate delivery of 46 737 Max 8 planes, 12 fewer than originally planned.
Overall, the the airline had expected to get a total of 79 737 Max jets, including several of the smallest model, the Max 7. However, the Max 7 has yet to be certified by the Federal Aviation Administration (FAA), and Southwest noted it doesn’t believe any will be put in service this year.
The Boeing situation led the carrier to write in a regulatory filing that it is “reevaluating all prior full year 2024 guidance, including the expectation for capital spending,“ and plans to give an update in its first-quarter earnings release April 25. In addition, Southwest reported that it was cutting its estimate for current-quarter revenue per available seat mile (RASM) to flat to up 2% from up 2.5%-4.5%.
For American, the issue is the cost of jet fuel. The airline warned that its current-quarter adjusted loss would be at “the low end” of its previous forecast of a decline of $0.15 to $0.35 per share. American said fuel prices “have increased considerably since the Company’s initial first-quarter guidance issued on January 25, 2024.” It noted then that it expected to be paying an average of $2.65 to $2.85 per gallon, and now sees the average price at $2.80 to $2.90 per gallon.
Southwest Airlines was the worst-performing stock in the S&P 500 at noon Tuesday, down 13.9% to $29.09. American Airlines (down 3.8%) and Boeing (down 4.2%) were also near the top of the list of big decliners.
JetBlue Airways (JBLU) and Delta Air Lines (DAL) shares were down 2.1% and 1.5%, respectively, following guidance updates Tuesday. Alaska Air Group (ALK) was a rare bright spot in the sector, with shares up about 0.5% after saying its first-quarter 2024 performance “is now on track to exceed the expectations” it held coming into the year, citing “strong demand.”