Southwest Airlines Has A 47% Chance Of Going Bankrupt

Southwest Airlines had a disastrous holiday season. They experienced what industry experts refer to as "mass cancellations." From December 22nd through December 28th the airline cancelled over 13,000 flights, accounting for roughly 50% of all of their flights nationwide. Winter storms contributed to the cancellations but an unprecedented wave of employees called out sick and Southwest's antiquated scheduling system buckled under the weight of hundreds of crews needed to be rescheduled at the same time. The result was tens of thousands of stranded passengers and employees and what the U.S. Transportation Department (USDOT) referred to as "unacceptable" behavior from the airline.

Southwest Airlines (LUV) is a publicly traded company and has suffered greatly in the past month over at the NYSE. On December 1st, the stock was trading at $40.08 per share. As of January 3rd it is down 19.4% to $32.30 per share. MacroAxis evaluates companies and provides the probability that financial distress under current economic and market conditions could lead to a company filing for bankruptcy. Given Southwest's current balance sheet, cash flow and income statements made available from the company's most recent filings, its fair to say that the one-time airline darling is now in grave peril as it relates to going under. 

Will Southwest Airlines File For Bankruptcy in 2023

Southwest Airlines historically has been viewed as a survivor within the industry. Prior to the pandemic, the company boasted 47 consecutive years of profits. And as other airlines have fallen during economic downturns, Southwest has seemingly always found a way to adapt and grow. But this time feels different. Unprecedented cancellations during a peak holiday season, a complete technical system failure coupled with a de facto employee walkout has spooked Wall Street investors and drawn the wrong kind of attention from the USDOT.  Even President Biden tweeted out that his administration "is working to ensure airlines are held accountable." In the modern era, airlines in the US cannot operate without massive government subsidies, which means that if Southwest's relationship with the federal government sours that could be the end of the airline altogether.

As for the worker issues, it's clear that they don't feel supported by the company. Last week, the Pilots union president Casey Murray was interviewed by NPR and blamed the antiquated software for Southwest’s holiday travel fiasco. “We're still using not only IT from the '90s, but also processes when our airline was a tenth of the size,” Murray told NPR's Morning Edition. “And it's really just not scaled for an operation that we have today.” He continued, "Southwest is having, really, some major issues connecting pilots to airplanes, connecting crews, flight attendants as well, to airplanes,” he said. “And it's been getting worse.”

Given the overall economic environment, the Southwest selloff could continue and threaten the airlines long-term viability. Sportsbooks odds will continue to fluctuate as the story unfolds.