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Southwest Airlines Co

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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation

Southwest's Travel Disruptions Will Result in a Q4 Loss, but Our Long-Term Outlook Is Unchanged

On Jan. 6, 2023, Southwest Airlines disclosed that 16,700 flights were canceled between Dec. 21-31, 2022, which reduced fourth-quarter available seat miles by roughly 6% compared with the same period in 2019 (previous guidance was for a 2% reduction). Management estimates that the combination of lost revenue ($400 million-$425 million) and higher expenses tied to travel expense reimbursements, disbursement of rapid rewards travel points (to build customer goodwill), and increased employee compensation will reduce pretax income by $725 million-$825 million. As such, management now expects the firm will report a fourth-quarter net loss.

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