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Southwest May Not Offer Cheap Flights, But They Still Offer Cheap Stock

On Thursday, July 19, Southwest Airlines plans to announce its second-quarter earnings.  The first-quarter earnings had been better than anticipated due to a hike in airfare, but the airline is hesitant to increase fares further as they do not want to put a dent in flight demand.  Without further increases in airfare, the only thing that will really make a difference in earnings for this quarter will be how Southwest’s acquisition of Air Tran affects the bottom line.

 

Southwest’s acquisition of Air Tran cost the airline a reported $155 million by the end of the last quarter, but the total of the acquisition, as well as integration costs, will come to an anticipated $500 million.  The costs of the acquisition and integration during the second quarter might exceed the available funds left over from the first quarter.  In addition, profit margins will be negatively affected by rising fuel costs and they experienced a slight decline in revenue passenger miles.

 

The above article is a summary.  Please see the source article at Google News.

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