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Who luvs Southwest?

Posted Nov 02 2007, 05:11 PM by Matt Koppenheffer
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It's been a challenging decade for the airlines. The 2001 terrorist attacks body slammed the industry, employee relations have been less than stellar as they try to cut costs, and the seemingly unstoppable price of oil continues to crimp business. American Airlines and Delta just pushed through some price hikes aimed at offsetting the rocketing price of jet fuel, and United and Southwest did some of the same last month.

For investors, the question is whether there is opportunity to be found in the face of these headwinds. On The Motley Fool's CAPS service, players are split on the prospects for Southwest, a long-time favorite among investors. Though there are fair number of Southwest bulls, the stock has just a two star rating -- suggesting that it's not among the best investment opportunities in the 5,000-stock CAPS universe.

One player bullish on the stock, KenN513, noted that "[Southwest] is the most solid of the large airlines. It has great financials and superb management." Others also noted how much the stock's price has fallen over the past few months. On the flip side, Southwest bear crepps sums it up very simply:

"Q: What do you have when you have an elite company within a lousy industry?
A: A lousy company."


He notes that competition is strong in the industry and that Southwest will be "paddling upstream."

So who's right? Head over to CAPS to see what others have said and chime in with your own thoughts.

(Full disclosure: I do not have a financial position in any of the companies mentioned.) 

Comments

 

Southwest Airlines is simply a STABLE company, suitable for LONG-TERM investors

I inspect Southwest Airline aircraft and engines.

You can not keep cutting required maintenance items and costs to improve net reserve profits and improve on your cash position. One crash and loss of lifes = a major offset and loss of the cash you saved by cutting required maintenance.

How do you improve on your cash position and not cut required maintenance?

Capitalize on loss markets within the USA and in Europe. Basic marketing concepts the US used 50 years ago. Give your customers service and provide that service in markets they want. Like a toy in the cracker Jack box. They are still selling Cracker Jack at higher price and sales are good. And when is the last time any one got sick or died from eating cracker Jack. A good model to follow in airline industry is Virgin Atlantic-Virgin America- Richard B. provides basic market concepts and has made enough money to not cut service or maintenance. Wake up america and make your investors happy. The rich are getting poor but I am not to sure if it will be any easier for them to go thru the eye of a needle. Maybe they think it will be easier to go to heaven once they are poor. Also check out a new company called SkyBus, same concepts as Virgin        

the future is jets that have very private full reclining seats..............

stacking the seats to get this effect perhaps

and first class means private rooms.............

and very nice music...............

if there is a future that is...........

I come from peoples who design jets big boats, not to boast..........

this company has been solid.sounds like a good bet to me.

don't you wonder some times about these experts and their decisions?the more opinions they crank out the better they get paid.and what do they use to make these decisions?why sheets and sheets of numbers.it's pretty common knowledge that numbers can mean just about anything the interperter wants them to mean.so it's just one opinion versus another.

Recommending LUV because it's the most financially sound of the US carriers is like crowning the Cubs because they won the NL Central.  It's no great feat.  With more secondary airports being opened to commercial traffic, the entrenched carriers in their respective segments enjoy a far lower perch of superiority.  And with the uncertainties of fuel prices, and the extent to which it can take financial control straight out of the hands of the carriers altogether.  LUV may find itself the largest player in a loss-generating market with no apparent remedy.

Even if the fuel outlook isn't so dire, they're hardly the only comer anymore, with AirTran and others offering amenities like First Class and marketing them in ways that make them allowable under many corporate travel policies, given with the "mass humanity" negative image of the traditional "budget carrier" shows that the one-time innovator is having to make changes to their core product to remain competitive, something they're not as agile to accomplish as their competitors.

Sure, there will always be a market for the last-second traveller who wants to pay the "lower" equivalent of "full fare", but virtualization is continiuing to erode the business market.  I'm not suggesting there are strategically better-posititoned carriers.  They're all a relative horror show.  And while there's always money to be made in cyclical or short-term news flash movement in stock price, any airline, and especially LUV have no place in MY longer term portfolio.

Southwest is a company comprised of dedicated, hard working individuals, who all enjoy the praise, accolades and hoopla that surround Southwest Airlines, the company. It has long been a contention among the "cogs-of-the-wheel", those who have made Southwest Airlines the company it has become, why no one ever questions the stock sales/trades made by the company's upper management. Wouldn't it seem logical that no one would have more inside trading information than those at the top whose very decision making cause the rise and fall of the company's stock prices? A prime example would be back in 2004 when the company closed 3 of it's 9 reservation centers....including it's most senior center, the Dallas reservations center. From the enormous amount of behind the scenes paperwork required to undertake such closings, it was obvious to insiders that the company was unloading it's most expensive employees....the most senior, Union employees in the company. Once all the paperwork was revealed concerning the closing, it became transparent the company had been setting up the closure for probably more than a year. There were extensive stock transactions made by upper management before the public (or employees) ever knew what was about to hit them. In other words, the upper management at Southwest had and still have first hand knowledge how their decisions are going to reflect on the Southwest stock price. And as MAJOR stock holders themselves, are capable of manipulating (and benefiting from) market ratings of Southwest stock. Most all employees own some Southwest stock. Fearing a major fall out from their "ambush" tactics of the '04 closings, numerous trades and sales of stock were made by upper management. Everyone is so enamoured with the "LUV" at Southwest, no one is really looking at how the game is played.        

I think some of the BIG WIGS better mcome off there high horse and take a cut inpay. And live like the rest of us do.

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