Air Travel
more rule-governed type of environment, that doesn't mean that you're a bad person, you are not compatible with Southwest’s personnel needs. Southwest has not had contested labor negotiations, which have occurred in most of the Airline industry. Agreements on new contracts should be reached more easily, as about 100,000 workers in the industry have been furloughed because of travel slump; Southwest has remained steadfast in not laying off any employees. Though Southwest appears mindful of gains by labor at other carriers, its pilots’ fortunes, i.e. stock options, have soared with the airline. Its pilots also are free to realize gains when options vest, rather than wait for retirement.
Key Investment Risks
Southwest’s operations make the carrier more appealing to the leisure traveler than the business traveler. In economic downturns, leisure travelers may reduce or eliminate discretionary travel.
Safety Concerns and Costs
Airlines face additional costs for new security procedures in the industry. New rules on luggage require all checked bags and their owners to be aboard each plane to get clearance. Also, starting in December 2002, airlines must screen all luggage, which will require expensive new detection machines, installation of which also necessitate costly renovations at airports.
Increased Competition
In some markets, Southwest faces low-fare, low-cost airline alternatives. And other low-cost operators, JetBlue, have entered long-haul markets profitably. Southwest also is subject to competition form surface transportation, i.e. cars, trains, owing to the carriers short-haul routes.
Lack of Alliances with Other Airlines
These alliances provide passengers from other airlines to complete itineraries.
Financial Statistics (money.com)
Southwest Airlines Co. (LUV)Industry: Airlines Current P/E: 31.5
Last Updated: 09-Apr-02
Analyst Consensus Recommendation: 2.3
1.0 - 1.5: Strong Buy 1.6 - 2.5: Buy 2.6 - 3.5: Hold 3.6 - 4.5: Underperform 4.6 - 5.0: Sell
Qtr Mar/2002 Qtr Jun/2002 FY Dec/2002 FY Dec/2003
Current Mean EPS 0.04 0.18 0.61 0.93
Number of Brokers 12 10 12 11
Year Ago EPS 0.15 0.22 0.51 0.61
Current High 0.07 0.22 0.69 1.08
Current Low 0.00 0.13 0.50 0.70
Median 0.04 0.19 0.62 1.00
Standard Deviation 0.02 0.03 0.06 0.11
Current vs. Year Ago -73% -18%