Southwest stock falls, American Airlines stock rises on earnings

Yahoo Finance Live anchors Julie Hyman and Brad Smith discuss quarterly earnings for Southwest Airlines and American Airlines.

Video Transcript

JUILE HYMAN: Let's take a look at some of today's movers as well. We've got airlines on the move in different directions. Troubles continue over there at Southwest, right?

But American Airlines out with an upbeat forecast on earnings. That beat analysts' estimates. Southwest navigating some more turbulence after incurring a net loss related to that December operational disruption. I guess that's a nice way of saying that it was a cluster-- I don't know which-- what the word.

BRAD SMITH: [LAUGHS]

JUILE HYMAN: I mean, it was a mess, a mess. There. That will be the way, the mess that was created there. Let's talk about Southwest first, shall we?

BRAD SMITH: Yeah, sure.

JUILE HYMAN: Because think this is the more interesting of the two with this happening and this wider-than-estimated loss because of what's going on. I still am trying to wrap my head around-- Southwest was such a consistent outperformer for so long. It is still kind of something I'm trying to grasp that it has now been seeing all of these bumps.

BRAD SMITH: Yeah, this is a rapid, unscheduled rut right now for Southwest Airlines that we're seeing. And it's particularly interesting because what you're hearing across the airline and the travel industry right now from the CEOs who are getting booking data, who are seeing where travelers are opting up for a higher spend or a better experience within either the flight or the accommodation side of the experience economy and that travel experience and service.

For Southwest Airlines that had for so long carved out and continues to have its own space in not necessarily low-low cost, but at least a more comparable or lower cost comparative to the super elites of the airlines that are out there, that's where you would sense that maybe consumers who were still very price conscious or looking for deals, that they were going to be flocking into services like Southwest and perhaps even spending up to get the flight schedule that they wanted, so forth. But I think what we're seeing in these results, especially as you've got, as expected, them incurring that net loss, as expected as well a hit on net promoter score after the two events now that have taken place, one of which was in the most recent quarter and one of them was just a few weeks ago, where they had to pause flights for a blip of time compared to the other outage or damage that took place for days, essentially, where there were delays. All of that considered, a hit to the net promoter score could even be more of a headwind for this company in the current quarter that we're in right now going into the summer travel season bookings.

JUILE HYMAN: Yeah, because there's demand out there. That doesn't seem to be in question. Southwest even talked about that, even though it said corporate earnings could continue to be choppy here.

But if you look at the American, second quarter profit forecast looks like it leaves it some room to beat estimates. That's one of the things that is helping it as well here and, again, seems to be another strong signifier of demand. So that doesn't seem to be the issue.

BRAD SMITH: Yeah, no, not for American. And American, we can remember as well, they had released their numbers or essentially gave a prerelease to their business update, even right before Delta had reported their numbers a few weeks back, and so really kicking off earnings season on an unscheduled note, but nonetheless had alerted to the Street of what was forthcoming. And I think within what we're seeing for American Airlines in this broader travel landscape, they're going to tend to be a bit more cautious at this point.

And that's what I took from this, is that they are being a bit more cautious, that there is-- I don't want to say sandbagging, but they're at least trying to make sure that they're setting a figure to the Street that they can underpromise and overdeliver on. And I think that's some of the tone that I'm gathering from AAL here out of the gate today.