Southwest Airlines: We See Fall Sale and Competition Crimping Yields; Lowering Fair Value Estimate

We've lowered no-moat Southwest Airlines' fair value estimate to $36 from $39 to reflect lower yields over the coming season and slightly higher average fuel costs in 2024 than we previously anticipated. The biggest impact to our valuation comes from lowering our estimate of the average selling price of a ticket for Southwest in the coming travel season, which, combined with elevated fuel costs that airlines would normally seek to pass on to customers in the form of higher average ticket prices, puts a further crimp on Southwest's near-term profitability.