Southwest Airlines’ third consecutive quarterly loss of USD91 million in the first quarter of 2009 took the market by surprise, prompting a 7.1% slump in the carrier’s share price yesterday. Several analysts immediately downgraded their ratings on the company.
Business and leisure travel fell sharply and the value of its fuel hedging programme plunged – and the outlook is for more pressure on earnings. Southwest’s unit revenues fell 2.9% in the first quarter and CEO, Gary Kelly, stated he "wouldn't be shocked at all" to see second-quarter unit revenue fall further. US domestic yields are in free-fall – dropping 14% in Mar-2009, according to the Air Transport Association.
Meanwhile Brazil’s largest LCC, GOL, is also struggling, with another fall in its share price yesterday prompted by a ‘Sell’ recommendation by UBS, citing high debt levels, weak demand and excessive capacity.
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North & South America selected airlines daily share price movements (% change): 16-Apr-09