As Covid-19 cases decrease across the U.S., conversations are again shifting to something that has been on people’s minds since the pandemic began — travel. While vaccine rollouts have allowed some to travel, restrictions posed by several countries have discouraged many from traveling overseas. Airlines are no stranger to turbulence, but the developments of the pandemic have led to turbulence in financial markets. This has caused more problems for publicly traded airline companies. Industry giant Southwest Airlines (NYSE:LUV) has recently seen what can happen when mass cancellations begin to dominate headlines. There’s a lot to do discuss, but let’s just say that LUV stock isn’t taking off so far this week.
LUV Stock: What’s Happening
Despite the symbol under which it trades, there hasn’t been much love for Southwest Airlines recently. This long weekend is an extremely busy travel time for many Americans, but the airline has reacted by canceling more than 2,000 flights. Three out of every 10 departures that the company had scheduled were canceled yesterday. Furthermore, this trend has continued through to today.
It’s hardly surprising that Wall Street would not react well to this news. LUV stock began the morning by plunging 3.54% as of this writing. Although it’s early in the day, it shows no immediate signs of reversing this trend. The stock is up 10.65% for the month but last week saw this trend start to change course, with shares falling 1.85% for the past five days.
Things aren’t much better for Southwest’s competitors despite gains across the industry last month. American Airlines Group (NASDAQ:AAL) and JetBlue Airways (NASDAQ:JBLU) have both enjoyed similar months in the green, but both saw their shares plunge on Oct. 6, falling by 6.79% and 5.24%, respectively. While LUV stock didn’t slide by as much on that date, its declines today have been more steep, with American Airlines and JetBlue falling 0.20% and 0.97%, respectively, as of this writing.
What It Means
There’s no getting around the fact that air travel is highly complicated right now. Even as vaccines have become more widely available, the millions of Americans who still remain unvaccinated have made it difficult for airlines to operate at full capacity. Demand for air travel isn’t slowing down, but the labor shortage also poses difficulties for airlines, specifically within the areas of air traffic control. Additionally, there’s always the factor of weather conditions, another reason cited by Southwest as the reason for their cancellations.
As the holiday season nears, demand for travel is only going to increase. However, it’s unlikely that airlines will be able to solve these pressing problems so quickly. The labor shortage shows no signs of going away, and changing climate conditions will continue to pose difficulties for airlines, particularly as we head into the winter months. Canceling this many flights does not make an airline look good, but it doesn’t seem like Southwest had any better alternatives. None of these developments will be good for stock prices.
Why It Matters
The holidays are going to be complicated enough this year with the supply chain shortage posing concerns for retail stocks. For investors considering airline stocks, the industry landscape looks almost as bleak. Airlines are dealing with forces largely beyond their control. Although there is plenty of demand for their services, the way it looks from here, they are going to be unable to supply it.
If you’re thinking about any bullish plays for the holiday rush, the typical industries are probably not a good bet this year for LUV stock or any other.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.