Airline stocks are continuing to struggle for many reasons. Companies are dealing with ongoing staff shortages as well as higher fuel costs. Despite vaccine rollouts, many airlines are having to cut flights to a degree never seen before. That’s exactly what’s going on with Southwest Airlines (NYSE: LUV), which announced it would be canceling thousands of flights.
Southwest first started making news over the weekend when it canceled over 1,800 flights on Saturday and Sunday. Since then, the company has canceled another 200 flights, of around 2,000 in total. There are differing explanations for why this is happening right now, depending on which party you ask.
The Southwest pilots association, which represents 9,000 of the company’s pilots, says management is the blame. The group argued that the company has been overworking existing pilots, which were being frequently reassigned even as earlier as back in the Summer. Other issues include working longer days and larger trips. All of this uncertainly has led to pilots refusing to pick up extra flights.
Southwest’s management takes a different stance. Instead, it cites air traffic control issues. Additionally, severe weather in Florida has also been hurting flight schedules. Staffing issues were mentioned as a smaller problem, in contrast to the story the pilots union told news reporters.
“When an airline gets behind it’s hard to catch up. We were thinly staffed coming into the weekend, and that certainly didn’t help things as we were trying to recover,” said Southwest CEO Gary Kelly in an interview.
There’s another reason behind this as well. Some pilots have supposedly been planning to protest against the airline’s new mandates that require Covid-19 vaccines for all pilots. Although the state of Texas has recently opposed this Federal mandate, that wouldn’t apply to a cross-state company like Southwest. While these allegations have been popping up more frequently, both the company and the union has denied claims of anti-vaccine protests.
Overall, it’s been a difficult time for airlines across the board. Many are trying to hire thousands of employees right now but are having difficulties. Despite current unemployment rates, hiring new employees has been a struggle even for the largest companies. Firms like Amazon (NASDAQ: AMZN) have even offered full-blown college tuition in exchange for new full-time hires. Southwest Airlines plans to add another 8,000 jobs in 2021.
Shares of Southwest were actually up by around 1.3%, despite the news. Since the year began, the airline has reported a 15.9% gain in stock price, which is slightly underperforming compared to the S&P 500SYP 500 or Nasdaq. Despite this, almost every Wall Street analyst has a bullish rating on the airline. 20 analysts have a “buy” rating of some kind, while just two are neutral.
Southwest Airlines Company Profile
Southwest Airlines is the largest domestic carrier in the United States, as measured by the number of originating passengers boarded. Southwest operates over 700 aircraft in an all-Boeing 737 fleet. Despite expanding into longer routes and business travel, the airline still specializes in short-haul leisure flights, using a point-to-point network. Southwest operates a low-cost carrier business model. – Warrior Trading News
