analyst Joseph DeNardi cited the airline's conservative balance sheet and strong liquidity, and the fact that the carrier still has plenty of unencumbered assets available.
It would be wise to proceed with caution, however. Airlines are taking on debt and issuing new shares to bolster their balance sheets for what is expected to be a prolonged downturn. This is happening as the specter of bankruptcies and consolidation looms large. This "presents an attractive entry point as Southwest will, undoubtedly, emerge from this crisis in a stronger position than it entered," he wrote in the report,. DeNardi noted that despite the difficulty of predicting the pace of demand recovery, historical evidence suggests that the overall air travel sector is one of the more resilient areas of the economy.
"That is, by far, the strongest liquidity position in the industry for a company which also has the strongest underlying balance sheet and the best leverage with its aircraft OEM when it comes to managing capex over the next few years," the Stifel report says. The airline also stands to benefit from future earnings through its credit card partnership with JPMorgan Chase. The bank purchases frequent-flyer miles from Southwest, which it then distributes to its cardholders as spending rewards.
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