Author Topic: LUV - Southwest Airlines  (Read 8566 times)

chesko182

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LUV - Southwest Airlines
« on: June 10, 2017, 11:03:25 AM »
Surprised I didn't find a post on this one. I'm almost done reading a book on the company's culture which I highly recommend (link below)
 
Some highlights/thoughts
-By far the most profitable airline historically, hasn't lost money since it first became profitable in 1973
-Enormous shareholder returns, 20% in the last 40 years!!! Founder Herb Kelleher had definitely an Outsider like mindset
-Culture is the key difference and moat, all employees are hired for their attitude/personality and there are some weird things in the company like everyone hugs before a meeting starts and flight attendants can present the airline safety communication in anyway they want, some sing it others tell jokes etc. People seem to love working there.
-A lot of operational efficiencies, they only have 737s in their fleet saving A LOT on maintenance, training, purchase discounts from boeing, etc and another key operational achievement is their plane turnover time is the lowest in the industry by a factor of half or something (time it takes for the plane to get into the gate, get passengers off, new passengers on and takeoff) which increases utilization a lot.
-Not screamingly cheap but for a quality business it looks OK trading at ~15X forward earnings
-Not sure how much growth it has going forward, they have started to fly internationally but will this hurt their margins?
-Competition: airlines obviously very competitive, but most majors have tried to copy their business model and failed

No position, but on my watchlist. Hurts a little to see the run it had the last few months, I wish I would have read the book last year.

Anyone else have a different opinion? I have only flown twice in Southwest so would love to hear some more recent experiences.

Large position for Monish, here's a good Podcast where he talks about the business: https://www.theinvestorspodcast.com/tip121-pabrai-funds/

Link to book Nuts! https://www.amazon.com/Nuts-Southwest-Airlines-Business-Personal/dp/0767901843/ref=sr_1_1?s=books&ie=UTF8&qid=1497116654&sr=1-1&keywords=nuts+southwest+airlines


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boilermaker75

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Re: LUV - Southwest Airlines
« Reply #1 on: June 10, 2017, 12:03:40 PM »
I always fly Southwest if I have a choice. No penalty if you have to change your flight.

no_free_lunch

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Re: LUV - Southwest Airlines
« Reply #2 on: June 10, 2017, 12:24:43 PM »
I have read that book on Southwest.  Interesting company for sure.  As stated, it doesn't seem cheap at this time but a good one for the watch list.

Ballinvarosig Investors

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Re: LUV - Southwest Airlines
« Reply #3 on: June 10, 2017, 01:22:24 PM »
-Competition: airlines obviously very competitive, but most majors have tried to copy their business model and failed
This is the pertinent point in every thing you've written. Earnings, ROE, margins, everything has blown out for all the airlines in the last two years. If you believe the Warren Buffet narrative that everything has changed for airlines, that competition is gone, then fill your boots, because LUV is going to produce out-sized returns. Personally, I am sceptical of the story, and think that buying a cyclical at 20x FCF is risky.

Cigarbutt

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Re: LUV - Southwest Airlines
« Reply #4 on: June 11, 2017, 06:21:40 AM »
Airlines haven't been long term value creators traditionally but, in this new era, the sky seems to be the limit.
Southwest appears to be special though.
A “culture” is hard to build and maintain, hard to replicate but I find it is difficult for outside investors to detect when the culture may be eroding.

When you look at airlines in general and also Southwest, it seems that the “story” in the last few years is too good to be true. Is it?

Any thoughts on their plan to expand (in Hawai and elsewhere)?
Any thoughts on the value of their frequent flyer program?

rogermunibond

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Re: LUV - Southwest Airlines
« Reply #5 on: June 11, 2017, 07:50:09 AM »
If you like LUV, would suggest RYAAY.

Recent run up in share price is supported by the weak position of Euro national carriers. RyanAir ramp has more years to go.

JRM

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Re: LUV - Southwest Airlines
« Reply #6 on: January 05, 2019, 12:09:23 PM »
Has anyone followed Southwest or any other airlines since last year?  I looked into them initially, but didn't bite.  On the surface the valuations look better today than a year ago.  If Berkshire is going to buy an airline outright it would be Southwest, right? 


perulv

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Re: LUV - Southwest Airlines
« Reply #7 on: January 06, 2019, 05:43:37 AM »
I bought some shares of LUV in may 2018. Here is a rough translation of my notes from back then:

"Looks like it has good fundamentals. Not much debt. OK Return on Assets. Not magical, but ok. Steadily increasing EPS. Made a profit "forever"."

I bought at $52/share in may.

chesko182

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Re: LUV - Southwest Airlines
« Reply #8 on: February 28, 2019, 10:49:58 AM »
stock up 5% on rumors Buffett might acquire it.

From Southwest:
“There has been speculation circulating that Warren Buffett might be looking to acquire an airline for some time and that Southwest might be a good fit,” the company said in a statement Thursday. “As a policy, we do not comment on speculation, but appreciate Berkshire’s continued support of Southwest Airlines.”
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perulv

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Re: LUV - Southwest Airlines
« Reply #9 on: March 12, 2019, 10:50:14 AM »
Isn't it a bit strange that LUV is only down 3% or so since Friday, with them having the biggest (?) fleet of 737-Max? I get that they are not grounded (yet), but surely that must be a possibility? Even if they are not grounded, the negative PR and lost business (people not wanting to fly the 737-max) must be quite dramatic?

(I own some LUV-stock. I have not done any calculations, probably wouldn't know how to, so this is just thinking out loud really...)
(Edit: I sold my LUV-shares. This is probably straight out of the common-cognitive-errors textbook, selling based on anecdotes and feelings. But my feeling (because all good investment ideas are based on feelings  ::) ) is that for some reason there is not enough negativity baked into the price atm).
« Last Edit: March 12, 2019, 12:40:30 PM by perulv »