Investors tend to react strongly to significant losses, reduced growth expectations, and the need for cutbacks in expansion and workforce.
Southwest Airlines (LUV) experienced this firsthand during its April 25 earnings call, revealing a larger-than-anticipated loss of $231 million, equivalent to 39 cents per share, for the first quarter of 2024.
This marked a decline from the previously projected 6% growth capacity to just 4%. Year-over-year, the airline faced a $159 million loss.
Following this news, the company’s stock tumbled nearly 10% upon announcement and remained down by 7.67% at $27 by Thursday afternoon. Southwest Airlines has yet to achieve a profitable quarter in 2024, as emphasized by Chief Executive Bob Jordan in a statement on the earnings.
To address this, the company is implementing significant measures, including laying off over 2,000 employees spanning various roles and discontinuing operations at four airports nationwide, including those in New York, Washington, Houston, and Cozumel, Mexico.
The airline attributes some of its growth challenges to Boeing 737 Max 8 production issues, which have resulted in fewer expected plane deliveries. This setback has forced Southwest to revise its route plans and adjust its growth trajectory.
Jordan emphasized the urgency of meeting financial objectives amidst these challenges. Despite generating $6.33 billion in revenue, up 11% from the previous year, operational costs and Boeing delivery issues contributed to cumulative loss for the quarter.
The decision to exit operations at the four airports was driven by their consistent unprofitability, independent of short-term earnings fluctuations or Boeing-related challenges.
