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The Key Takeaways
- Southwest Airlines stock fell Thursday after the Department of Transportation sued the airline over a pair of "chronically delayed flights."
- Southwest has operated flights for the past five months that have arrived more than 50 percent of time later than schedule.
- Citi analysts also downgraded Southwest's stock, citing concerns with the airline's valuation compared with its domestic rivals.
Southwest Airlines shares (LUV), which are traded on the New York Stock Exchange, fell sharply Thursday following a lawsuit filed by the Department of Transportation against the airline. “chronically delayed flights.”
The federal agency said late Wednesday that Southwest operated two flights—from Chicago to Oakland and Baltimore to Cleveland—that qualified as "chronically delayed" for five straight months in 2022.
Flight is defined as “chronically delayed” The agency stated in a court document filed on Wednesday that it will take action if a flight is delayed at least 30 mins more than 50% of the time and occurs at least 10 days a week. When a flight that is chronically late has been advertised as normal for four consecutive months, the DOT will consider taking action. “unrealistic scheduling” Can give airlines an advantage in the competitive market.
"Southwest is disappointed that DOT chose to file a lawsuit over two flights that occurred more than two years ago," a Southwest spokesperson told Investopedia. "Since DOT issued its Chronically Delayed Flight (CDF) policy in 2009, Southwest has operated more than 20 million flights with no other CDF violations. Any claim that these two flights represent an unrealistic schedule is simply not credible when compared with our performance over the past 15 years."
Frontier Airlines (ULCC), which operates under the DOT, was also fined $650,000 by the DOT on Wednesday. “three chronically delayed flights between August 2022 and April 2023,” JetBlue Airways (JBLU), which was fined $2 million for its illegal operations, has been fined earlier this month. “four chronically delayed flights at least 145 times between June 2022 through November 2023.”
Citi Downgrades Southwest
Citi analysts on Wednesday downgraded Southwest Airlines’ stock from “sell” You can also find out more about us on our website. “neutral” And cut their price targets by $2 each to $29.50. The reason given was that Southwest stocks trade at a greater premium than those of some U.S. rival airlines. They expect an increase in the price of Southwest stock. “correcting” Southwest will be valuing its assets in the coming months.
Southwest’s shares were recently down by more than 3 percent. The shares are up over 10% in the past year.
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