Delivery delays tied to ongoing production issues at Boeing forced an outlook adjustment at Southwest Airlines, Southwest announced Tuesday morning. Elsewhere, American Airlines retreated after providing a gloomy update on rising fuel prices. Delta Airlines offered the most positive update by maintaining its outlook.
Boeing reportedly informed the Dallas-based airline it could deliver 48 of the 58 737 MAX 8 aircraft previously promised during 2024. The two companies had initially contracted for a total of 79 737 MAX aircraft to be delivered during the year. An unspecified number of those were to be 737 MAX 7 aircraft, the smallest of the MAX line.
The delays led Southwest Airlines to reevaluate "all prior full year 2024 guidance, including the expectation for capital spending."
Southwest said it expects to report a new loss in the first quarter, while returning to profitability in March. It guided expectations for flat to 2% gain in revenue per available seat mile during the first quarter, down from prior guidance for a 2.5% to 4.5% gain.
It noted stronger than expected first-quarter performance and low levels of cancellations, and said it expected capacity to increase 11% for the quarter, more than its initial 10% estimate.
The company reports results April 25.
FactSet expect Southwest Airlines to report aQ1 loss of 6 cents per share, improving from a loss of 27 cents the year prior. Analysts predict revenue growth accelerates for the second consecutive quarter, increasing 14% to $6.49 billion.
Southwest Airlines Stock
The news sent Southwest shares down 14.9% Tuesday. Southwest shares ended Monday poised below a handle buy point in a long, deep bottoming base.
Argus upgraded Southwest shares to a buy, from hold, and assigned a 40 price target early Tuesday. The note said capacity reductions had increased the airline's outlook over the past several months.
Boeing retreated 4.3% Tuesday, adding to its 3% skid Monday. BA stock tumbled more than 29% in 2024 through Tuesday's close as production issues plague its 737 Max line.
American, Delta Updates
Elsewhere, American Airlines Tuesday provided a downbeat outlook based on rising fuel prices.
American Airlines now expects to pay between $2.80 to $2.90 per gallon for fuel in the first quarter, up from its previous estimates of $2.65 to $2.85 per gallon. Based on the assumptions, American forecasts a first-quarter adjusted loss at the lower end of its guidance range between 15 cents and 35 cents per share. FactSet analysts predict a loss of 22 cents per share, declining from earnings of 5 cents per share the year prior.
American maintained its capacity outlook of a 6.5% to 8.5% increase in available seat miles. Its total revue per available seat mile forecast was unchanged at 3.5% to 5.5% growth.
AAL retreated 4.7% Tuesday, dropping further from a 15.84 buy point for a flat base.
Delta Airlines maintained its outlook with only one positive change for revenue.
Delta guided total Q1 revenue growth in the upper half of its 3% to 6% guidance range. The Atlanta-based airline kept its operating margin forecast of about 5%. Delta expects Q1 earnings between 25 cents and 50 cents per share, compared to FactSet estimates of 36 cents.
The company sees full-year earnings between $6 and $7 per share, compared to $6.25 per share the year prior. Delta guided 2024 free cash flow increasing to range from $3 billion to $4 billion, up from about $2 billion.
FactSet predicts full-year earnings of $6.45 per share with $3.47 billion in free cash flow.
DAL stock reversed higher to tick up 0.2% Tuesday after easing modestly as airline stocks lost altitude in early trade. Delta is working up the right side of a cup base toward a 49.81 buy point but it still has a ways to climb. Shares gained 6.3% so far this year.
