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Southwest Airlines & AMFA Ink Tentative Deal: What's Ahead?

Zacks Equity Research

Southwest Airlines LUV recently issued drab guidance for first-quarter 2019 revenues and costs. Multiple headwinds like the grounding of Boeing 737 MAX jets and the 35-day partial government shutdown were the primary reasons behind the bearish projections. These headwinds are likely to hurt revenues to the tune of $150 million. Additionally, non-fuel unit costs are projected to increase 10% during the first quarter of 2019. Detailed results will be released on Apr 25.

Amid the aforementioned headwinds, the Dallas-based carrier received encouraging tidings on the labor front when it inked a tentative deal with Aircraft Mechanics Fraternal Association (AMFA) — the union representing its 2,400 mechanics and related employees. We remind investors that, in March 2019, the carrier signed an agreement in principle with AMFA, after six years of negotiations.

Now that a tentative agreement has been inked, the mechanics and related employees will vote on the same. The union intends to communicate directly with the mechanics and related employees on the ratification procedure.

Southwest Airlines Co. Price


Southwest Airlines Co. Price | Southwest Airlines Co. Quote

The pay-related deal will become effective for five years, if the outcome of the voting procedure is favorable. In that case, the agreement becomes amendable on Aug 16, 2024. Naturally, investors would remain focused on whether the tentative deal receives approval or not.

Zacks Rank & Key Picks

Southwest Airlines carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are SkyWest, Inc. SKYW, Swire Pacific Ltd. SWRAY and Azul AZUL. While SkyWest and Swire Pacific sport a Zacks Rank #1 (Strong Buy), Azul carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

Shares of SkyWest, Swire Pacific and Azul have rallied more than 28%, 22% and 8%, respectively, on a year-to-date basis.

Zacks' Top 10 Stocks for 2019

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