Stock Markets

Analysis-Southwest Airlines to end its brand-defining open-seating policy. Will it work?

Published

2 months ago

July 30, 2024

By Rajesh Kumar Singh

CHICAGO (Reuters) – Southwest Airlines (NYSE:)’ plan to eliminate open seating is one way for the company to raise much-needed revenue, but it comes with the risk of alienating loyal customers.

The unusual practice of letting passengers choose their own seats once they board the plane was created by Southwest’s egalitarian-minded founder, Herb Kelleher, and has been central to the airline’s brand image for more than 50 years.

But the feature is about to end, torpedoed by disappointing earnings and share performance since the pandemic and pressure from activist investor Elliott Management. The Dallas-based airline last week announced it would pivot to assigned seating instead. It plans to share more details at its investor day in September.

The company also plans to offer seats with extra legroom – yet another departure from Kelleher, who disliked dividing airline seating into different classes of service. Southwest said the new cabin layout will require approvals from the U.S. Federal Aviation Administration and is expected to be available for bookings in 2025.

The lack of assigned and extra-legroom seating has been one of the biggest obstacles to Southwest’s ability to attract premium travelers, said Henry Harteveldt, founder of travel consultancy Atmosphere Research Group.

“As a business, you always want to give your customers a reason to pay you more,” he said.

Investors and analysts say the company had little choice but to evolve. Shares have lost nearly half their value in the last three years, during a time when the has gained 25%. The company’s trailing price-to-earnings ratio is above 33, far exceeding the industry median of 4.86, and just two analysts of 18 have a “buy” rating on the stock, according to LSEG data.

Southwest needs new high-margin revenue streams to offset cost pressures and boost profit. Its operating margin declined to 0.2% in the first half of this year from more than 13% in 2019.

Analysts at Raymond James expect the changes to contribute 95 cents a share to the airline’s earnings next year. Rivals such as Delta, United and Alaska Airlines have been relying on big-spending premium travelers to protect their profits.

Last week, Southwest CEO Bob Jordan called the change a “strategic transformation” that could generate more than $1 billion in annual revenue and broaden the airline’s appeal.

Analysts say Southwest’s success hinges upon its ability to market and sell the changes and break in to a market it has never served before.

“Expectations should be tempered that assigned seating is a lightswitch change for Southwest,” said Conor Cunningham, an analyst at Melius Research.

Elliott Investment Management did not see it that way either, dubbing the changes “too little, too late,” reiterating its demand for new leadership. The firm is trying to oust CEO Jordan and board chair Gary Kelly, saying the company needs fresh perspectives.

Last Thursday, Jordan said while the company wanted to hear Elliott’s feedback, the activist investor had not shown willingness to engage in any meaningful conversations.

Southwest considered abandoning open seating and switching to assigned seating in 2006 but dropped the idea after tests showed the move might hurt its efficiency and increase boarding time by 1 to 4 minutes. The switch could also drive up labor costs as Southwest could need more agents for boarding.

How customers will respond is unclear. Jordan said the company surveyed tens of thousands of customers, with many citing its open seating policy as the No. 1 reason for deciding to stop flying with Southwest and choose a rival.

Some travelers wondered if the company would also do away with its policy of no fees for bags. Jordan has said the company has no plans to start charging for bags, adding that the airline’s data shows that a no-bag-fee policy is the No. 1 reason customers choose to fly Southwest.

To some customers, though, the end of open seating is a major blow to the airline’s uniqueness.

“Southwest, I fear you are losing your differentiation with this choice,” Robb Winger, who called himself a Southwest “loyalist,” wrote on LinkedIn.

Stock Markets

Consumers Energy Expanding Community Solar Program with 30-Acre Solar Project in Jackson County

Published

6 hours ago

September 20, 2024

JACKSON, Mich., Sept. 19, 2024 /PRNewswire/ — Consumers Energy plans to break ground next spring on Blackman Solar, a new 30-acre community solar array in its home Jackson County that will provide local clean energy to customers through its Solar Gardens program.

Consumers Energy this week received approval from Blackman Township for the community solar project, which is slated to start generating electricity by the end of 2025.

“Blackman Solar is a great example of a partnership with a community to develop a project that delivers reliable, clean energy as well as local tax and economic benefits,” said David Hicks. Consumers Energy’s vice president of renewable energy development. “We’re grateful for the reception we’ve received from Blackman Township leaders and are excited to continue developing solar projects like this on our path to a carbon-neutral electric grid.”

Blackman Solar will generate power for Consumers Energy’s Solar Gardens community solar program, in which customers choose to support new solar projects without having to own solar arrays.

The new community solar facility will be the fourth that Consumers Energy owns and operates, joining other Solar Gardens projects in Cadillac, at Western Michigan University and at Grand Valley State University. Blackman Solar will include nearly 5,000 solar panels and will generate up to 2.5 megawatts of renewable electricity for 2,500 future Solar Gardens customers.

Blackman Solar also will provide new capacity to expand Consumers Energy’s income-qualified Solar Gardens program MI Sunrise. MI Sunrise is an efficient, easy, cost-effective way for municipalities, nonprofits and tribal governments to deploy federal grant dollars, providing access to clean, reliable renewable energy and measurable financial benefits to offset energy bills.

“Blackman Solar will help meet increased demand for community solar and offers shared solar infrastructure, accessibility and inclusivity, as well as financial and environmental benefits for all customers,” Hicks said.

Consumers Energy is committed to Michigan’s clean energy future. The energy provider is closing its final three coal-burning units next summer, one of the nation’s most aggressive timetables. The company is developing solar projects as part of its Clean Energy Plan to be carbon-neutral by 2040.

Consumers Energy is Michigan’s largest energy provider, providing and/or electricity to 6.8 million of the state’s 10 million residents in all 68 Lower Peninsula counties. Consumers Energy’s Clean Energy Plan calls for eliminating coal as an energy source in 2025, achieving net-zero carbon emissions and meeting 90% of customers’ energy needs through clean sources, including wind and solar.

For more information about Consumers Energy, go to ConsumersEnergy.com.

Check out Consumers Energy on Social Media

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Stock Markets

First Horizon Is Now the Official Bank of the Ragin’ Cajuns

Published

6 hours ago

September 20, 2024

MEMPHIS, Tenn., Sept. 19, 2024 /PRNewswire/ — First Horizon (NYSE:) Corp. (NYSE: FHN or “First Horizon“) is proud to announce that First Horizon Bank is now the Official Bank of the University of Louisiana at Lafayette Ragin’ Cajuns.

This five-year agreement expands First Horizon’s long-term commitment to the University and includes a Ragin’ Cajun Visa (NYSE:) Debit card, prominent in-venue signage, entertainment and hospitality opportunities along with participation in game day fan activations and experiences, including the new Cajun Village.

“This is an exciting time to expand our partnership with ULL and ULL athletics,” said Jerry Prejean, President of Acadiana for First Horizon. “With more than $2.5 million invested in recent years towards academic and athletic excellence, First Horizon is proud to deepen our relationship with the University and work together as two long-standing community leaders dedicated to making Acadiana a great place to call home.”

“As opportunities have grown for businesses to support Ragin’ Cajuns athletics, First Horizon Bank has been right there growing with us every step of the way,” adds Brian Bille, General Manager of LEARFIELD-based Ragin’ Cajuns Sports Properties. “Jerry’s commitment to our community has never wavered, and I’m excited to help First Horizon build affinity with our fans through this enhanced partnership, and encourage our fans to add the all-new Ragin’ Cajuns branded debit card to their wallet.”

About First Horizon
First Horizon Corp. (NYSE: FHN), with $82.2 billion in assets as of June 30, 2024, is a leading regional financial services company, dedicated to helping our clients, communities and associates unlock their full potential with capital and counsel. Headquartered in Memphis, TN, the banking subsidiary First Horizon Bank operates in 12 states across the southern U.S. The Company and its subsidiaries offer commercial, private banking, consumer, small business, wealth and trust management, retail brokerage, capital markets, fixed income, and mortgage banking services. First Horizon has been recognized as one of the nation’s best employers by Fortune and Forbes magazines and a Top 10 Most Reputable U.S. Bank. More information is available at www.FirstHorizon.com.

Stock Markets

Oil prices rise on easing demand worries after jumbo Fed rate cut

Published

6 hours ago

September 20, 2024

Investing.com — Oil prices jumped Thursday, riding on a wave of risk-on sentiment as the Federal Reserve’s outsized interest rate cut on Wednesday eased worries that a slowing US economy would further dent crude demand.

At 2:06 p.m. ET (1906 GMT), rose 1.6% to $74.80 a barrel and rose 1.8% to $71.12 a barrel.

Jobless claims rise by less than expected

The number of Americans filing for first-time unemployment benefits rose by less than anticipated last week, with coming in at 219,000 in the week ended on Sept. 14, compared with an upwardly revised 231,000 in the prior week.

Economists had forecast a consensus figure of 230,000.

This figure was better than expected, and has allayed to a degree concerns over the health of the US economy, particularly after the Federal Reserve started its latest rate-cutting cycle on Wednesday, trimming interest rates for the first time since March 2020 by a hefty 50 basis points to a range of 4.75% to 5%.

While lower rates usually bode well for economic activity, the Fed’s aggressive cut sparked some concerns over a potential slowdown in economic growth.

While Fed Chair Jerome Powell helped soothe some of these concerns, he also said that the Fed had no intention of returning to an era of ultra-low interest rates, and that the central bank’s neutral rate was likely to be much higher than seen in the past.

His comments indicated that while interest rates will fall in the near-term, the Fed was likely to keep rates higher in the medium-to-long term.

US inventories fall, but product stockpiles up

Government data released on Wednesday showed a bigger-than-expected, 1.63 million barrel draw in .

While the draw was much bigger than expectations for a draw of 0.2 mb, it was also accompanied by builds in and inventories.

The builds in product inventories sparked increased concerns that U.S. fuel demand was cooling as the travel-heavy summer season wound to a close.

Looking ahead, some expect further draws in domestic crude stocks as exports reaccelerate.

“We look for a significant rebound in exports across crude and products this week. Among products, our preliminary expectations point to draws in gasoline (-1.5 MM BBL) and distillate (-3.7 MM BBL) with a build in jet (+0.5 MM BBL),” Macquarie said in a recent note.

Crude deficit could boost Brent

Still, prices could be bolstered in the near-term by demand possibly outstripping supply in the fourth quarter, according to analysts at Citi.

A reported decision by the Organization of the Petroleum Exporting Countries and its allies to delay the beginning of a tapering in voluntary output cuts, along with ongoing supply losses in Libya, is predicted to contribute to a oil market deficit of around 0.4 million barrels per day in the final three months of 2024, the Citi analysts said.

They added that such a trend could offer some temporary support to Brent “in the $70 to $75 per barrel range.”

Meanwhile, the benchmark could be further boosted by a potential rebound in recently tepid demand from top oil importer China, the analysts said.

But they flagged that they still anticipate “renewed price weakness” in 2025, with Brent on a path to $60 per barrel due to an impending surplus of one million barrels per day.

(Peter Nurse, Ambar Warrick contributed to this article.)