Analyst Note| Burkett Huey, CFA |
No-moat-rated Southwest reported operational difficulties in an improving travel market during the third quarter, as it strained to grow to meet demand. Delta variant caseloads slowed traffic growth and made traffic less predictable, but the virus did not meaningfully depress traffic. Revenue of $4.7 billion and adjusted loss per share of $0.23 beat FactSet consensus by 2.1% and 15.8%, respectively. We are reducing our fair value estimate for Southwest to $63 per share from $65 as we account for increased landing fee inflation and a slightly slower revenue outlook.