How Is Southwest Likely To Grow In The Next Two Years?

+21.27%
Upside
29.27
Market
35.50
Trefis
LUV: Southwest Airlines logo
LUV
Southwest Airlines

Southwest Airlines (NYSE:LUV) is one of the largest airlines to operate in the U.S. Like many of its competitors, the company suffered operational failures through most of the second half of FY 2017 on adverse weather conditions that plagued the East Coast. However, things have improved now, and we expect the company to continue growing at a modest pace. In general, the company is expected to improve its overall revenues by 2% over the next two years.

We have created an interactive dashboard which shows the forecast trends. You can modify the different revenue drivers to see how it will impact the company’s expected revenues.

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The company derives almost 93% of its revenues from its Mainline segment. We expect the segment to grow to about $29.8 billion at a CAGR of around 1%. This growth is possible thanks to an improving economy that is expected to boost demand for both business and leisure air travel. Further, we expect the company’s expansion plans to really help drive revenues in the coming year. For instance, Southwest is expected to start operations to Hawaii very soon. This should help push the top line.

While Cargo revenue growth is expected to come in positive, the revenue increase will not be very much. In contrast, we expect a jump in sales at Mainline to help drive growth at Other as well, pushing the segment’s revenues to over $2 billion by FY 2019.

Overall, we expect the company to improve sales across all its division, leading to a near $700 million increase in revenues to the FY 2017 figure of $32 billion.

 

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