Airliners Flying Into The Sunset
- Rico
- Nov 18, 2024
- 2 min read
In an earlier post, I focused on the travel industry specifically the cruiseliners. A month later, not much has changed and you should still stay away from the travel industry. First, consumers lives have not gotten any better,(consumer stats). Unemployment is still hovering around 4%, Layoffs are still occurring, It is getting more difficult to find new jobs, and consumer debt is still climbing with delinquency rates still high.³
Secondly, one of the best airliners is still struggling in this economy. I'm talking about Southwest. Southwest was once one of the best and most staple of the travel industry. There model of affordable flights, open seating, and economic model was once an industry trailblazer and copied by many of the economic airliners.
And while Southwest still beat estimates for the third quarter and they are talking strength according to the earnings call(use quotes) " Thus far in the quarter, travel demand remains healthy and bookings-to-date for the holiday season are strong, demonstrating the continued resilience of the leisure travel market". But don't let that draw you in and fool you into a false sense of confidence in this industry. Southwest had revenue of 6.87 billion vs. 6.74 estimates. They logged earnings of 15 cents per share vs 0 estimates. However, that is still far below the earnings they had just last year. And that is only after major slashing of costs and routes that may alienate some consumers. (Include customer seating). Southwest is planning to get rid of its open seating plan in favor of charging for seating as well as their extra legroom option²
On top of that, there is now infighting on the way forward for Southwest. (Recent deal). Southwest has been fighting it's activist investor Elliott Investment Management who accused the airliner of nor moving fast enough on sales and profit boosting strategies.¹ They have since struck a deal that adds 6 of the activist's candidates to the board and CEO Bob Jordan gets to keep his job.²
Southwest is not looking to be staple again until 2027 and that might be the time where I would start looking at travel stocks again. For now, there are much better places to park you money. Bad consumer economy, bad earnings, travel stocks are a bad play.
*This is solely my personal thoughts and opinions and not to be taken as financial advice. For that, please contact your financial advisor
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