Southwest Airlines shares took a hit on Tuesday after the company announced plans to reduce capacity and reassess its financial outlook due to fewer expected aircraft deliveries from Boeing, its supplier. According to a regulatory filing, Boeing is now expected to deliver 46 737-8 planes this year, significantly lower than the 79 737 Max aircraft deliveries initially anticipated by Southwest.
Southwest also disclosed that it does not foresee any 737-7 aircraft deliveries and assumes that no 737-7 planes will be put into service this year, citing ongoing certification issues with the Federal Aviation Administration.
For the first quarter, Southwest revised its operating revenue per available seat mile forecast to be flat to up 2%, down from the previous estimate of up 2.5% to 4.5%. The company also adjusted its economic fuel costs per gallon projection to a range of $2.95 to $3, up from the earlier estimate of $2.70 to $2.80.
Boeing, the aircraft manufacturer, is currently under intense scrutiny and facing multiple government investigations. Transportation Secretary Pete Buttigieg recently called for a 'serious transformation' in Boeing's safety and manufacturing practices following incidents such as a panel detachment from a Boeing 737 Max jetliner during a flight.
The Department of Justice has initiated a criminal investigation into a blowout incident on an Alaska Airlines jet, where Boeing failed to provide requested work records. The Federal Aviation Administration is also conducting its own investigation into Boeing's operations.
Boeing has been criticized by the National Transportation Safety Board for withholding information related to the Alaska jet incident. The FAA has restricted Boeing from increasing production of Max jets and issued a 90-day deadline for the company to address quality-control issues.
As a result of these developments, Southwest's stock plummeted nearly 15% in morning trading, reflecting investor concerns over the airline's operational challenges and the broader issues facing Boeing.
