Southwest Airlines No Longer Ranked Top 3 Global Carrier By Market Value

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Summary

  • Southwest Airlines’ value has been overshadowed by other low-cost airlines.
  • Despite being a major carrier, Southwest still faces stiff competition from budget carriers.
  • Legacy US carriers like American, Delta, and United have introduced Basic Economy fares to compete.


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In an industry dominated by the low-cost market, Southwest Airlines has consistently been considered one of the leading carriers. However, as more airlines begin to tailor their products and fares to the low-cost model and experience record growth, the Dallas-based airline has reportedly been kicked off its throne.

Airlines depend on many components contributing to their stock and value, but growth and industry recognition are major factors. Although there is no question that Southwest is not recognized across the industry, its growth appears to be lacking – at least compared to its low-cost counterparts.


Decades of growth

According to The Street, Southwest has been joined by Atlanta-based Delta Air Lines and European low-cost airline Ryanair as the world’s top three airlines with the highest total value of company shares owned by its stockholders – otherwise known as market capitalization. Throughout its nearly 60-year history, Southwest has gone through several growth spurts, particularly in the last decade.


Southwest Airlines Boeing 737-8H4 at Orlando International Airport.

Photo: Orlando International Airport

While the airline has long been a contender in the US domestic market, it became an international airline for the first time in 2014 with flights to Nassau, Bahamas; Montego Bay, Jamaica; and Aruba. Now, the carrier flies to 15 international destinations, including Los Cabos, Puerto Vallarta, Cancun, Cozumel, Belize, San Juan, and Punta Cana.

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Five years after inaugurating international service, Southwest joined the transpacific market with flights to the Hawaiian Islands. The airline flies to five destinations in the state from eight mainland gateways. More recently, the carrier confirmed that it is planning to offer red-eye flights in a few years, which will likely boost its transpacific operation and introduce more transcontinental flights. With decades of success, despite its holiday meltdown in 2022, Southwest finished last year with a market cap of $17 billion, according to The Street.


Which airline has a higher market value?

In India, low-cost airline IndiGo commenced operations in 2006 – nearly four decades after Southwest flew its first flight. Listed as InterGlobe Aviation on two of the country’s stock exchanges, the airline reportedly recorded a market cap of $17.5 billion (1.46 trillion Indian Rupees).

An IndiGo aircraft on an airport apron.

Photo: Joe Ravi | Shutterstock

On Friday, its value was approximately $45.66 (3,806 Rupees) on the Bombay Stock Exchange, accounting for a spike of nearly 30% since the beginning of this year. According to The Street, the results pushed Southwest from among the three most valuable airlines in the world.


Increased competition from US carriers

Although the airline does not face any competition whatsoever from IndiGo, other US airlines are noticing the demand for lower fares, which, for some, has driven their profits. The ultra-low-cost carrier Frontier Airlines has grown rapidly in recent years. Earlier this year, the Denver-based airline announced a massive expansion to over 30 destinations, with initial fares starting at just $19.

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Spirit Airlines has also experienced significant growth in recent years, but it has since been plagued by financial insecurities, which were subsequently exacerbated by its merger fallout with JetBlue Airways, and Pratt & Whitney engine problems. Last week, the airline announced pilot furloughs and deferred deliveries of some Airbus A320neo family aircraft. On the contrary, Breeze Airways recorded its first profitable month in March since launching operations in 2021. The fast-growing airline now serves over 50 destinations, mainly supported by its new A220-300 jets.

The low-cost market has undoubtedly caught the attention of US legacy carriers. All three – American Airlines, Delta, and United Airlines – have introduced fare classes known as Basic Economy, which allows passengers to book flights at the cheapest price. The tickets, however, come with restrictions, such as no seat assignments, being the last to board, and no access to airline lounges.


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Read More: Southwest Airlines No Longer Ranked Top 3 Global Carrier By Market Value

2024-04-14 04:22:00

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