Rising Costs Mar Southwest Airlines' 5-Year Plan
At its investor day on Wednesday, Southwest Airlines (NYSE: LUV) laid out ambitious plans to return to industry-leading margins as it recovers from the COVID-19 pandemic. The airline ultimately hopes to grow its pre-tax margin beyond pre-pandemic levels within a few years.
However, investors weren't impressed. Southwest Airlines shares barely budged on Wednesday -- even though the company raised its Q4 guidance -- and the stock retreated on Thursday and Friday. Indeed, while Southwest has a solid plan for growing revenue over the next few years, rising costs could make it hard for the low-fare airline to meet its profitability goals.
Back in October, Southwest Airlines provided a rather dire forecast for the fourth quarter. Management projected that revenue would decline 15% to 25% compared to the fourth quarter of 2019 on an 8% capacity reduction, while adjusted nonfuel unit costs would rise 8% to 12% over the same period. As a result, Southwest told shareholders that it expected to report another quarterly loss.
Source Fool.com
