Airlines stall on guidance updates; Boeing Woz Hammer Southwest

Delivery delays are tied to ongoing production issues Boeing (B.A) is forced to adjust a perspective Southwest Airlines (LUV), Southwest announced Tuesday morning. Elsewhere, American Airlines (AAL) pulled back after giving a gloomy update on rising fuel prices. Delta Air Lines gave a more positive update, maintaining its outlook.




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Boeing has reportedly told the Dallas-based airline that it can deliver 48 of the previously promised 58 737 MAX 8 planes by 2024. The two companies were initially contracted to deliver a total of 79 737 MAX aircraft this year. An unspecified number of those will be 737 MAX 7 aircraft, the smallest of the MAX lineup.

The delays have led Southwest Airlines to re-evaluate “all guidance prior to 2024, including capital expenditure expectations.”

Southwest expects to report a new loss in the first quarter, while returning to profitability in March. It guided expectations for a 2% revenue per available seat mile in the first quarter, down from previous guidance for a 2.5% to 4.5% gain.

It cited stronger-than-expected first-quarter performance and lower levels of cancellations, and expects capacity to grow 11% in the quarter, up from its initial 10% estimate.

The company announces results on April 25.

FactSet expects Southwest Airlines to report a loss of 6 cents per share, an improvement from a loss of 27 cents a year earlier. Analysts had forecast revenue growth of 14% to $6.49 billion for the second consecutive quarter.

Southwest Airlines Stock

The news sent Southwest shares down nearly 13% in early trading. Southwest shares are poised to close below a handful of buy points in a long, deep trough that ended Monday.

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Argus set Southwest shares to a Buy, Hold, and assigned a $40 price target in early Tuesday's session. Capacity reductions over the past several months have increased visibility of the aircraft, the note said.

Boeing fell 3.5% early Tuesday, adding to its 3% slide on Monday. BA shares fell more than 26% through Monday's close in 2024 as production problems hit its 737 Max line.

American, Delta updates

Elsewhere, American Airlines issued a downbeat outlook Tuesday on rising fuel prices.

American Airlines now expects to pay $2.80 to $2.90 per gallon for fuel in the first quarter, up from $2.65 to $2.85 per gallon. Based on the assumptions, American forecast a first-quarter adjusted loss of 15 cents to 35 cents per share, at the lower end of its guidance range. FactSet analysts had forecast a loss of 22 cents per share, down from earnings of 5 cents per share a year earlier.

American maintained its capacity outlook of a 6.5% to 8.5% increase in available seat miles. Its total revenue per available seat mile forecast was unchanged at 3.5% to 5.5% growth.

AAL retreated 4% early on Tuesday, falling further from a 15.84 buy point for a flat floor.

Delta Airlines (DAL) maintained its outlook with only one positive revision to earnings.

Delta guided for total Q1 revenue growth in the upper half of its 3% to 6% guidance range. The Atlanta-based airline kept its operating margin forecast at around 5%. Delta expects Q1 earnings of 25 cents to 50 cents per share, compared with FactSet estimates of 36 cents.

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The company sees full-year earnings of $6 to $7 per share, up from $6.25 per share a year earlier. Delta guides 2024 free cash flow to increase from $3 billion to $4 billion, up from about $2 billion.

FactSet forecasts full-year earnings of $3.47 billion with free cash flow of $6.45 per share.

DAL shares were modestly lower on Tuesday as airline stocks lost ground. Delta is working towards a 49.81 buy point to the right of a cup base, but it still has a ways to go. Shares are up 5.5% so far this year.

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