Quarterly profit for Southwest Airlines drops by 21% amidst the Boeing 737 Max grounding

Quarterly profit for Southwest Airlines drops by 21% amidst the Boeing 737 Max grounding
Written by:
Michael Harris
24th January, 14:38
Updated: 11th March, 09:06
  • Quarterly profit for Southwest Airlines drops by 21% amidst the Boeing 737 Max grounding.
  • Boeing says 737 Max is not likely to return for commercial flights by summer 2020.
  • Southwest Airlines quarterly revenue prints 0.4% growth as compared to the same quarter last year.
  • Total costs rose by 7.7% for Southwest Airlines in 2019.

Southwest Airlines is the latest to have announced its fourth-quarter performance results in the current cycle of earnings reports. As per its announcement on Thursday, the airlines saw a massive 21% decline in quarterly profit as Boeing 737 Max grounding continued to weigh on its results.

In the league of U.S airlines, Southwest has the greatest number of 737 Max not in its fleet but also in pending orders as well. Boeing’s 737 Max has remained grounded following two fatal crashes in five months that caused 346 causalities. In its announcement on Thursday, the Dallas based carrier highlighted that the financial impact of Boeing’s ban is still evident on the airlines’ quarterly performance.

Boeing Says The 737 Max Is Unlikely To Return For Commercial Flights By Summer

In its recent statement, Boeing has highlighted that the chances of FAA deciding in favor of lifting the ban from the fuel-efficient 737 Max jetliner are slim. As per the analysts, since the planes won’t return for commercial flights before summer that is known to be a peak time for travelers, airlines like Southwest which rely on the Boeing’s grounded planes are expected to remain under pressure in the upcoming quarters as well.

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Southwest highlighted a massive 21% decline in its net income that was posted at $514 million, as compared to the figure for last year. On revenues front, however, at $5.73 billion, the company managed to beat the analysts’ estimate for the fourth quarter while noting a 0.4% increase versus the same quarter last year. The company also accentuated to have faced a $313 million drop in its operating income in the fourth quarter. For all of 2019, operating incomes recorded a much larger $828 million of decline.

Total Costs Rose By 7.7% For Southwest Airlines In 2019

In terms of total costs, Southwest reported an increase of 7.7% in 2019 as compared to the last year, much of it was also attributed to the 737 Max grounding. According to Refinitiv, analysts were expecting $1.09 of earnings per share (EPS) for the airlines in the fourth quarter. Adjusted EPS of $1.16, however, was posted slightly higher than the expectations on Thursday.

Southwest Airlines have performed almost flat on average in January 2020. The stock opened the year at $54.84. At the time of writing, the stock is exchanging hands at $55.40. Despite complications, however, the company posted a little under 20% gain in the stock market in 2019.

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