Per Reuters, Southwest Airlines Co. LUV has finally received an approval for its long-awaited plans to operate flights to the Hawaiian Islands. On Wednesday, the U.S. Federal Aviation Administration (FAA) granted Southwest a nod to begin flights between California and Hawaii. Earlier, the 35-day government shutdown delayed the carrier’s plans to begin the new service.
This expansion is a key step toward Southwest’s growth initiatives for 2019. Last month, the carrier announced plans to increase flying by 5% this year, half of which will emerge from its Hawaiian flights. In fact, the carrier trimmed its international route extension plans to accommodate this popular vacation destination.
The airline plans to serve the islands from the Californian cities of Oakland, San Diego, San Jose and Sacramento. Within Hawaii, the airline will serve Honolulu, Kahului on Maui, Kona, and Lihue on Kauai. The company has additional plans to ply between these islands as well. Tickets on the routes will be shortly available.
Competition for Other Carriers
With this Dallas, TX-based carrier joining the likes of United Airlines, the wholly owned subsidiary of United Continental UAL, Delta Air Lines DAL and Hawaiian Airlines, the unit of Hawaiian Holdings HA among other carriers, in its new service to Hawaii, there will be intense competition on the routes. While it is a win-win situation for Southwest, which sells tickets at low prices, other carriers might be forced to cut down on their air fares. Moreover, Southwest’s low-fare Hawaiian flights could pose severe challenges to Hawaiian Airlines that largely depends on air travel demand to Hawaii. Loss of market share in its primary market might have a grave impact on the stock.
Southwest Facing Labor Disputes
In recent times this Zacks Rank #2 (Buy) company has been embroiled in an ugly spat with its mechanics over several out-of-service aircraft that caused numerous flight cancellations since Feb 15. The airline and some 2,400 of its mechanics represented by the Aircraft Mechanics Fraternal Association (AMFA) have been negotiating on pay-related issues for more than six years. The call for the new service is anticipated to bring some respite to Southwest in terms of the negativity the company has been engulfed in. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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