Southwest Airlines stock falls as US carriers battle rising fuel costs

(SeaPRwire) –   Southwest Airlines Co. announced adjusted quarterly profit and revenue figures that narrowly missed Wall Street’s projections, as the US carrier, along with its competitors, faces challenges from escalating fuel expenses.

Shares of the Dallas-based airline saw further declines in after-hours trading after Southwest opted not to revise its full-year profit forecast of at least $4 per share, highlighting the industry’s inherent instability.

The company stated that achieving this profit target would necessitate a reduction in fuel prices combined with improved revenue generation. For the second quarter, it projected adjusted earnings per share to be between 35 cents and 65 cents, falling short of the 59 cents anticipated by analysts.

Southwest’s stock dropped 3.8% to close at $39.35 during regular trading on Wednesday, mirroring the stock performance of other airlines.

Southwest’s stance aligns with that of other carriers struggling with fuel costs that have been driven up by the US-Iran conflict. Rival carrier Delta Air Lines Inc. has also refrained from updating its full-year outlook, while others such as United Airlines Holdings Inc. and Alaska Air Group Inc. have either adjusted or withdrawn their guidance.

In the first quarter, Southwest reported earnings of 45 cents per share, compared to analyst expectations of 46 cents. Operating revenue reached $7.25 billion, falling short of the approximately $7.29 billion that analysts surveyed by Bloomberg had forecast on average.

Analysts are expected to question Southwest executives during an earnings call on Thursday regarding the extent to which the airline can increase fares to offset fuel costs without deterring customers.

The airline is also in the midst of a significant corporate overhaul, which includes the introduction of premium seating, lounges, and other initiatives aimed at improving its financial performance.

“A substantial portion of the transformation Southwest has undertaken, from premium seating to baggage fees, has been geared towards enhancing revenue from its existing core passenger base,” stated Melius Research analyst Conor Cunningham in a note. “With two domestic fare increases now implemented, Southwest may be the most susceptible to demand destruction among its peers.”