Low-cost airline Southwest Airlines (NYSE:LUV) declined in pre-market trading after the company lowered its seating capacity forecast and stated that it would have to reevaluate its FY24 guidance. The airline stated that airplane manufacturer Boeing (NYSE:BA) advised it that LUV should expect 46 737-8 aircraft deliveries this year instead of its prior estimate of 79 737 MAX aircraft deliveries. Consequently, LUV does not expect any 737-7 aircraft deliveries this year.
The company added that due to the lower-than-expected aircraft deliveries, it expects to reduce capacity primarily for the second half of 2024, which will likely result in at least a one-point reduction to its FY24 capacity plans on a year-over-year basis. This has resulted in LUV reevaluating its FY24 guidance.
Additionally, the company lowered its guidance for operating revenue per available seat mile (RASM) and now anticipates it to remain flat year-over-year in the first quarter or increase by 2%. This contrasts with its previous estimate of RASM increasing in the range of 2.5% to 4.5%. RASM is a measure of airline efficiency calculated by dividing operating income by available seat miles (ASM).
LUV has projected that available seat miles (ASM) will increase by approximately 11% year-over-year in Q1, compared to its previous forecast of a 10% rise.
What is the Future of LUV Stock?
Analysts remain sidelined about LUV stock with a Hold consensus rating based on one Buy, nine Holds, and one Sell. Over the past year, LUV stock has gained by more than 10% and the average LUV price target of $30.09 implies a downside potential of 10.9% at current levels.
