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Of course, being at the top gave it a larger fall when the coronavirus shutdowns grounded flights. American Airlines Debt/Equity Ratio SoarsĪmerican Airlines is the biggest airline in North America based on passengers carried, with 205.2 million people traveling on it in 2019. But it’s competing with bigger airlines, most notably American. It’s still the leanest airline in the majors and should have no trouble providing value to passengers during rough economic times. Twenty years ago, Southwest was an aggressive startup that had such a positive effect on the markets it served that the term “ Southwest Effect” was coined. While it slowly started to budge toward the end of October, this high ground could prove to gain customer loyalty in a stigmatizing age. While this is slowing the travel growth, Southwest is prepared with the lowest debt-to-equity ratio among the airlines and implemented its own passenger capacity limit to ensure social distancing between travelers. It slowed its daily cash burn to $16 million per day by the end of the summer while fulfilling increased demand for Labor Day and into the holiday season.Ī second wave of the coronavirus is hitting in the winter with flu season hot on its tail. This is after reporting a record third-quarter loss of nearly $1.2 billion and announcing it is likely to furlough employees starting in 2021.Īlthough revenue declined 68.2 percent in the quarter, it still beat estimated with a 68.2 percent year-over-year decline. Southwest Airlines stock crashed to a 52-week low of $22.46 at the onset of the coronavirus, and it’s still struggling to reach its pre-covid price range of $55-$60 per share. What can investors expect in the coming years? Southwest Stock Plummeted Along With Revenues Investing in airline stocks right now could provide a discount on a long-term value, assuming things return to normal. Thankfully, it is low-interest debt, and air travel is picking back up heading into the holiday season.
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It will not be easy – the government’s bailout grants are gone, and the stimulus loans being offered give them debt to work through.
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So, which is the better investment between American Airlines stock vs Southwest Airlines?īoth are in for a slow recovery that’s likely to drag well into the 2020s. Meanwhile, each of these companies implemented aggressive cost-cutting strategies to slow daily cash burn rates while ramping up passenger capacities. As the year continued, these airlines could reopen and travel has been slowly picking up. They lost 95 percent of revenue in March as global lockdown orders hit and they issued travel restrictions that turned airports into ghost towns. American Airlines Group Inc ( NASDAQ:AAL) and Southwest Airlines Co ( NYSE:LUV) were at ground zero of the coronavirus pandemic.