- Southwest Airlines on Tuesday blamed a mechanics union for hundreds of flight cancellations.
- The union hit back, accusing the carrier of scapegoating.
- On Wednesday, Southwest said the impact from the government shutdown could be four times its previous estimate.
- Goldman Sachs downgraded the stock to “sell” on Tuesday, citing margin pressures from the launch of Hawaii flights.
- Shares sank more than 5% in trading on Wednesday. Follow the stock’s price in real time here.
It hasn’t been a good week for Southwest Airlines.
The carrier on Tuesday blamed a mechanics union, the Aircraft Mechanics Fraternal Association, for hundreds of flight cancellations in recent days.
“On Feb. 12, just days after our last negotiations session with AMFA, we experienced an unprecedented number of out-of-service aircraft in four specific maintenance locations despite no change in our maintenance programs, no changes in leadership, and no changes in our policies and procedures,” Southwest’s chief operating officer, Mike Van de Ven, said in a statement.
“We are committed to operating a safe fleet, and every report is investigated, which is why we issued a notice to require an ‘all hands’ response to get out-of-service aircraft back into the fleet serving our customers.”
This week, Southwest has canceled more than 600 flights and delayed over 1,000 others, according to the flight-tracking website FlightAware. Last week, it declared an “operational emergency,” saying the number of out-of-service planes had doubled from the 20 it usually plans for.
The mechanics union hit back, accusing the airline of using it as a scapegoat for other issues.
“For Southwest’s leadership to connect the airline’s self-declared ‘operational emergency’ to collective bargaining negotiations is simply an attempt to divert attention away from the airline’s safety issues,” the 2,700-member organisation said in a statement.
Shares of Southwest sank more than 5% in trading on Wednesday, as a revenue guide-down for the first quarter of 2019 and a Wall Street downgrade also weighed on investors’ minds.
In a regulatory filing on Wednesday, the airline said the government shutdown would have more of an effect than the previously estimated $US10 million to $US15 million. It said it now expects a negative revenue impact of $US60 million in the first quarter because of “softness in passenger demand and bookings as a result of the government shutdown.”
Separately, a downgrade from Goldman Sachs related to Southwest’s launch of Hawaii flights added to the airline’s headache. The analyst Catherine O’Brien cut her rating to “sell” for the stock, saying the new routes could shrink Southwest’s pretax margins by 60 basis points.
“We continue to be positive on LUV’s long-term thesis, but we prefer ALK at this time,” she said in a note to clients Tuesday evening, referring to the ticker symbols for Southwest and Alaska Air Group.
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