Southwest Airlines Co.
Industrials · Passenger Airlines
Structural: largest US domestic LCC by share, ~820-plane all-737 fleet (NG + MAX 7/8), point-to-point network anchored in BWI/MDW/DAL/LAS/PHX, Rapid Rewards loyalty co-brand with $JPM. Single-fleet model historically delivered industry-low CASM-ex but the moat has compressed as $DAL and $UAL pulled away on premium and $ALK/$ALGT chip at the LCC base.
2024 Elliott activist campaign forced board refresh, CEO transition path, and a strategic plan abandoning two LUV trademarks: open seating (assigned seats from 2026) and single-cabin (premium extra-legroom rows). 5B incremental EBIT per management, closing RASM gap vs network carriers; (2) Boeing 737 MAX 7 certification + delivery cadence resets fleet ex-growth toward mid-single-digit ASM expansion; (3) Elliott-era cost program targets ~$500M run-rate, share buyback restarted; (4) loyalty + co-brand renegotiation with $JPM is an undermonetized lever vs $DAL/$AXP and $UAL/$JPM economics.
(1) executing a fare-segmentation pivot on a point-to-point network without alienating the price-led base is unproven; (2) $BA MAX delivery slippage caps capacity growth and stretches fleet age; (3) all-737 concentration is a single-point-of-failure (2024 MAX 9 grounding spared LUV but a MAX 7/8 event would not); (4) labor cost step-up post-2024 pilot/FA deals lifts CASM-ex into a softening domestic leisure backdrop; (5) jet fuel + macro leisure demand are exogenous and procyclical.