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Southwest to Cut May Capacity by 40% Amid Coronavirus Crisis

Southwest Airlines Co. LUV plans to cut capacity by more than 40% effective May 3 through Jun 5 as passenger demand sees an uninterrupted drop due to the coronavirus pandemic.

With this trimmed schedule, the airline will fly 2,000 flights per day, down by 1,700 from its normal level. Apart from schedule reduction, the low cost carrier is shortening the time period for its operations by removing most departures before 7 a.m. and after 8 p.m.

Nevertheless, management at the airline stated that it was maintaining flight operations to every city within its network. Moreover, it was preserving nearly 80% of itineraries it previously served though some non-stop flights might need a halt now.

Similar to other airlineslike United Airlines UAL, Alaska Airlines, the subsidiary of Alaska Air Group ALK and Delta Air Lines DAL, Southwest is witnessing a significant drop in passenger bookings due to the coronavirus outbreak. As a result, the carrier issued a bearish view on total revenue per available seat miles (TRASM: a key measure of unit revenues) for first-quarter 2020 (detailed results will be available on Apr 23). The carrier expects first-quarter TRASM to have either dipped 2% or increased up to 1% (previous expectation: increase in the 3.5-5.5% range)from the year-ago figure. Moreover, first-quarter operating revenues are expected to have declined between $200 and $300 million.

Due to falling demand, shares of Southwest have declined more than 35% since the beginning of February. The industry has depreciated 49.5% in the period.

Price Performance Since February



Zacks Rank

Southwest carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report
 
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