Southwest Continues to Plan Growth Against Investor Wishes
Photo courtesy of Southwest Airlines
Growth is good, right? To Southwest investors, that may not be the case.
According to a report from Bloomberg, Southwest Airline Co. is continuing plans to expand the company and has rejected calls from those investors to raise fares. While those moves sound like absolute joy to frequent Southwest fliers, it’s clear that investors believe the company could do more to spur profitability.
Moves like raising fares and fees while limiting capacity and routes are exactly what much of Southwest’s competition is doing. This clash comes on the heels of a double-digit decline in Southwest’s shares but a record year of profits in 2015.
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In fact, this month, the company announced record quarterly profits and it’s 160th-straight quarterly dividend. So, could it be that investors are painting too gray a picture when the company is clearly doing well?
Maybe, but there’s more to the story as well.
Though revenue has been good, it’s not met projections, and investors are worried that the company isn’t proactive enough about meeting rising costs—especially in terms of labor. Those concerns have led to widespread concern and less active investment in Southwest, which has driven that aforementioned 18 percent dip.
Generally, those concerns are shared with the rest of the U.S. air industry, but Southwest seems content to blaze its own path rather than join with their competitors in revenue-boosting tactics. That their investors are concerned shouldn’t be a surprise. That they continue to walk down that path may be.
More by Michael Schottey
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