Bernstein: Consumer Demand Strong, Fares Continue to Rise
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Says consumer demand remains strong despite increase in fares. Says industry has had seven consecutive fare increases since February with fuel costs rising. Says there's "no indication" the consumer is elastic in current fare environment. Sees fares staying high even after fuel prices drop. Says consumer demand "very strong" despite higher fares. Comments taken from Bernstein 42nd Annual Strategic Decisions Conference.
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Analyst Views on LUV
Wall Street analysts forecast LUV stock price to rise
14 Analyst Rating
4 Buy
9 Hold
1 Sell
Hold
Current: 43.310
Low
34.00
Averages
44.21
High
60.00
Current: 43.310
Low
34.00
Averages
44.21
High
60.00
About LUV
Southwest Airlines Co. (Southwest) operates Southwest Airlines, a passenger airline that provides scheduled air transportation in the United States and near-international markets. The Company's fare products include four categories: Wanna Get Away, Wanna Get Away Plus, Anytime, and Business Select to provide customers options when choosing a fare. It also offers ancillary services, such as EarlyBird Check-In, Upgraded Boarding, and transportation of pets and unaccompanied minors, in accordance with Southwest’s respective policies. Its Rapid Rewards loyalty program enables program members to earn points for every dollar spent on Southwest base fares, also including purchases paid with LUV Vouchers, gift cards, or flight credit, with no portion of the purchase price paid with Rapid Rewards points. It operates over 803 Boeing 737 aircraft in its fleet and serves 117 destinations in 42 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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See More
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- Initial Strategic Shift: This technological upgrade is seen as an important step for American Airlines in enhancing customer loyalty and attracting higher-paying customers, although further investment is needed to keep pace with industry modernization.
See More
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- Fuel Price Impact: Alaska's management anticipates that higher fuel costs will reduce earnings per share (EPS) by $0.70 in Q1 and over $3 in Q2, highlighting the significant pressure from soaring fuel prices.
- Strong Demand Continuity: Southwest Airlines' CEO noted that despite rising fuel costs, air travel demand remains robust, with the airline participating in seven consecutive fare increases without any drop in demand, providing a positive signal for Alaska Air.
- Potential Earnings Revision: Analysts expect Alaska Air to report a $0.77 loss per share in 2026, but if the airline can offset fuel costs with higher ticket prices, future earnings estimates may see positive revisions.
See More
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- Strong Industry Demand: Despite soaring fuel prices, Delta Air Lines reported that strong demand from the first quarter is continuing into the second quarter, indicating sustained consumer demand for air travel, which is particularly relevant for Alaska Airlines.
- Earnings Forecast Adjustment: Alaska Airlines anticipates a $0.70 reduction in earnings per share due to rising fuel costs in the first quarter and over $3 in the second quarter, but if they can offset these costs with fare increases, future earnings expectations may see positive revisions.
See More
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- Strong Demand Persistence: Despite seven fare increases since February, Southwest has not experienced a drop in demand, demonstrating the effectiveness of its pricing strategy and the continued strong market demand, which helps cover rising fuel costs.
- International Route Exploration: Southwest may consider launching long-haul international flights in the future, a strategic move that could further expand its market share and revenue streams, enhancing the company's global competitiveness.
- M&A Environment Monitoring: While the current environment feels “ripe” for consolidation, Southwest is not considering acquisitions, particularly regarding JetBlue due to its debt load, reflecting the company's focus on maintaining financial health.
See More
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- Historical Fare Increases: Jordan noted that this is the most fare increases he has recalled in his 38-year career in the industry, reflecting the widespread cost pressures faced by airlines, with Southwest responding by raising fares to counter rising fuel costs.
- Market Diversity: He highlighted that demand remains strong across various geographical regions and booking curves, suggesting that consumer demand for air travel is growing in all markets, further solidifying the company's market position.
- Optimistic Revenue Outlook: With fare increases and stable demand, Southwest Airlines is poised to offset rising fuel costs through stronger revenues, demonstrating the company's resilience and adaptability in a competitive airline market.
See More
