Southwest Revenue Pessimism Damps Stock as Recovery Elusive

  • Industry slumps on concern that airfare pressure hasn't ended
  • Forecast disappoints investors after signs of optimism

Southwest Airlines Co. abandoned its forecast for a possible increase in a benchmark revenue gauge this quarter, stoking investors’ concern that the industry is still struggling to prop up airfares.

The revision squelched some of the emerging airline-industry optimism that pressure was easing from U.S. price wars and an expansion of available seating. Revenue from each seat flown a mile will be unchanged or decline as much as 1 percent from a year earlier, Southwest said. The carrier previously projected a gain of about 1 percent.

The forecast was “surprising given a number of positive data points and commentary from other carriers,” Credit Suisse AG analyst Julie Yates said in a note.

Southwest slumped 9 percent, the most among companies in the Standard & Poor’s 500 Index, to $45.04 at the close in New York. The Bloomberg U.S. Airlines Index declined 4 percent, erasing its gains for 2015. The gauge is now down 1.3 percent this year, pointing toward the first annual decline since 2011.

“Given the lack of clarity, we expect a lot of questions” when Southwest Chief Executive Officer Gary Kelly speaks at an industry event in New York Thursday, Cowen & Co. analyst Helane Becker said in a note to clients.

Plunging fuel bills continue to bolster the prospects for airline profits. U.S. jet kerosene fell Tuesday to the lowest since March 2009, according to data compiled by Bloomberg.

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