Southwest Airlines (NYSE:LUV) is considering cutting pilot hours and pay as it deals with growing costs and overstaffing due to delays in Boeing (NYSE:BA) aircraft deliveries, according to Reuters. The airline company, which only flies Boeing planes, has been hit hard by Boeing’s safety issues and now expects to get only 20 planes this year. This is way less than the 84 it originally planned for. As a result, Southwest has to dial back its growth plans, which caused shares to slip in today’s trading.
The plan to cut hours should kick in by September and will affect hundreds of pilots. While Southwest is still working through its staffing issues brought on by Boeing’s problems, it hasn’t yet finalized a deal with the pilots’ union. Preliminary talks have begun with the Southwest Airlines Pilots Association (SWAPA), which is focusing on how to manage the shortfall in plane deliveries.
Southwest is also planning to stop flying to four airports and shrink its operations in big cities like Chicago and Atlanta. On top of that, the airline is putting a freeze on most hiring and plans to end the year with about 2,000 fewer workers than last year. This comes at an unfortunate time, as the company has likely been seeing growing demand for flights based on its website traffic trends pictured below:
Is LUV a Good Buy Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on LUV stock based on five Buys, nine Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After an 8.7% decline in its share price over the past year, the average LUV price target of $32.50 per share implies 24.28% upside potential.
