Yahoo Finance Southwest Airlines Poised to Move Higher With Domestic Bookings Picking Up Steam
The global airline industry is among the hardest-hit business sectors of this virus-induced recession, and stock prices of publicly listed airlines have plummeted this year as the global travel industry came to an abrupt standstill as a result of the mobility restrictions imposed by governments around the world to curb the spread of the virus. There are, however, early signs of recovery.
To attract health-conscious passengers, many airlines in the country have introduced a plethora of safety measures such as limiting the number of tickets available per flight, deep cleaning and sanitizing the aircraft before the takeoff, and ruling it mandatory to wear a face mask before onboarding the flight. These measures seem to be working, and Southwest Airlines Co. (LUV) is likely to be one of the first airlines to report promising numbers.
The Strong Footprint In The Domestic Market Will Help Southwest
In 2019, Southwest Airlines was the leading domestic carrier with a market share of 19.52%. It’s reasonable to assume that domestic travel will pick up well before international and business travel, which tilts the odds in favor of Southwest to become the first player in this space to report some sort of an improvement in the bookings for the third and fourth quarters of this year.
The Liquidity Position Makes Southwest The Best Bet For The Recovery In Demand
A strong balance sheet position is required to weather the current economic storm, and Southwest is in strong financial health. The company had $9 billion in cash on hand at the beginning of May, and to further improve the liquidity position, Southwest raised an additional $4.6 billion in May through the issuance of equity and debt. Company CFO Tammy Romo said in April, “We are the only domestic airline to be rated investment grade by all 3 rating agencies.” This statement highlights the commitment of the management to maintain a robust balance sheet, which will likely be proven the differentiator during these trying times.
Wall Street analysts have a median target price of $41.70 per share, indicating an upside of 29% from the current market price of around $32.
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This article was originally posted on FX Empire
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