Southwest Airline Blamed For Stock Dips

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Airline stocks pulled down by Southwest’s lowered outlook - Airline stocks fell Tuesday, as a downbeat revenue outlook from one of the sector’s stellar performers—Southwest Airlines Co.—weighed on investor sentiment.

Southwest’s stock LUV, -1.20%  tumbled 9%, a day after the stock rose to second-consecutive record close. Volume of 20 million shares was nearly four times the full-day average of about 5.6 million shares, according to FactSet.

Earlier Tuesday, the air carrier said it now expects fourth-quarter operating revenue per available seat mile, a key industry revenue metric, will be about flat to down 1% from a year ago. A month ago, the company said it expected fourth-quarter operating RASM to increase 1%.

Southwest’s stock selloff helped push the NYSE Arca Airline Index XAL, -1.21%  down 2.7%, the biggest one-day percentage decline in nearly two months. Southwest’s shares were the biggest decliner in the Dow Jones Transportation Average DJT, -0.46% which slumped 2.8%, while its sister index, the Dow Jones Industrial Average DJIA, -0.43% shed 0.9%.

FactSet

“We believe there has been a softening in domestic fares in off-peak periods compared to what seen toward the end of October when airlines provided initial guidance updates,” Analyst Savanthi Syth at Raymond James wrote in a note to clients. “We believe the softness in off peak demand is likely due to capacity in 2015 growing at a faster clip than demand…with capacity plans not scaled back despite weaker-than-expected demand early on in the year due to the sharply lower fuel price level (thus substantially improved profitability).”

Among other shares of actively traded air carriers, Delta Air Lines Inc. DAL, -1.51%  slid 2.9%, American Airlines Group Inc. AAL, -2.02%  shed 2.7%, JetBlue Airways Corp. JBLU, -2.95%  dropped 1.5% and United Continental Holdings Inc. UAL, -1.35%  slumped 3.1%.

Of that group, Delta’s stock had closed at a record on Monday.