MBA FPX 5008 Assessment 4 Presenting Data Analysis Results Effectively

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Capella University

MBA-FPX 5008 Applied Business Analytics

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Date

MBA FPX 5008 Assessment 4 Presenting Data Analysis Results Effectively

Southwest Airlines Co. (NYSE: LUV) is a major U.S. airline whose financial performance is influenced by fuel prices, passenger demand, competition, operating costs, and broader economic conditions. Analyzing Southwest’s historical stock prices, trading volume, moving averages, and descriptive statistics can help investors understand its market performance and potential risks. This analysis examines historical stock data from July 2017 through July 2022, compares Southwest with United Airlines, Delta Air Lines, and American Airlines, and evaluates how the COVID-19 pandemic and other industry factors affected airline stocks. The findings can support a more informed assessment of Southwest’s financial position, although historical data alone cannot predict future stock performance or determine whether a stock is suitable for a particular investor.

Introduction to Southwest Airlines Co.

Southwest Airlines began operating in 1971, initially serving destinations in the continental United States from its base in Dallas, Texas. Over time, the airline expanded its network, including service to Puerto Rico in 2013 and international destinations beginning in 2014. Its business model has traditionally emphasized affordable fares, operational efficiency, and a customer-focused travel experience.

Southwest’s competitive approach has included elements of a differentiated, low-cost business strategy. Rather than relying solely on premium services, the airline has historically focused on providing accessible air travel, maintaining operational efficiency, and developing customer loyalty. These priorities have helped shape its position in the U.S. airline industry.

MBA FPX 5008 Assessment 4 Presenting Data Analysis Results Effectively

Evaluating Southwest’s financial performance requires more than examining its share price. Investors can also assess financial ratios, operating measures, and industry-specific indicators. Important financial measures include the quick ratio, return on assets (ROA), and debt-to-capitalization ratio. Airline operating metrics include available seat miles (ASM), revenue per available seat mile (RASM), cost per available seat mile (CASM), and the break-even load factor.

The quick ratio measures a company’s ability to cover short-term liabilities using its most liquid assets. ROA evaluates how effectively the company uses its assets to generate earnings, while the debt-to-capitalization ratio helps assess its reliance on debt financing. Airline-specific measures provide additional insight into capacity, revenue generation, cost efficiency, and the percentage of seats that must be filled to cover operating costs (Maverick, 2022).

Historical Stock Data and Figures

Historical stock data can reveal patterns in price movements, trading activity, and market volatility. For this assessment, Southwest Airlines’ stock data from July 12, 2017, through July 11, 2022, provides the basis for examining price trends and comparing the airline with other major U.S. carriers. The analysis uses scatterplots, histograms, and descriptive statistics to identify patterns in historical market behavior.

Figure 1.1: Southwest Airlines’ Highest Stock Prices and 100-Day Moving Average

The first scatterplot illustrates Southwest Airlines’ historical daily high stock prices alongside a 100-day moving average. A moving average smooths short-term fluctuations and helps identify the broader direction of a stock’s price trend. When the share price remains above the moving average, it may indicate positive momentum; when it falls below the average, it may signal weakness during the period being examined.

Historical data should be interpreted in context. A moving average is a descriptive indicator rather than a guarantee of future performance, and it should be considered alongside earnings reports, operating results, industry developments, and broader market conditions.

View Figure 1.1: Southwest Airlines’ Highest Stock Prices

Figure 1.2: Southwest Airlines’ Lowest Stock Prices and 100-Day Moving Average

The second scatterplot examines daily low stock prices and their relationship to the 100-day moving average. Reviewing daily lows alongside daily highs provides a broader view of price fluctuations and possible downside pressure.

A sustained decline in daily lows may suggest weakening investor confidence or broader market uncertainty. However, interpreting this pattern requires additional information about the airline’s financial results, operating environment, and overall market conditions. The moving average can help identify historical trends, but it cannot independently establish the cause of a price decline.

View Figure 1.2: Southwest Airlines’ Lowest Stock Prices

Figure 2.1: Histogram of Southwest Airlines’ Adjusted Closing Prices

A histogram displays how frequently stock prices occur within different price ranges. The adjusted closing price accounts for certain corporate actions, such as stock splits and dividend adjustments, allowing historical prices to be compared more consistently.

The histogram for Southwest Airlines helps identify price ranges in which the stock traded most frequently during the study period. A concentration of observations within a particular range may indicate that the stock spent a substantial portion of the period trading around those values. A wider distribution can reflect substantial price variation over time.

A histogram does not show the order in which prices occurred. Therefore, it should be interpreted alongside time-series charts and other statistical measures to understand whether price changes reflect a gradual trend, a sudden market disruption, or repeated fluctuations.

View Figure 2.1: Southwest Airlines’ Adjusted Closing Prices

Figure 2.2: Histogram of Southwest Airlines’ Trading Volume

Trading volume represents the number of shares exchanged during a specified period. A histogram of trading volume shows how frequently different levels of trading activity occurred throughout the study period.

Higher trading volume can indicate increased investor participation, particularly around earnings announcements, major company developments, or industry-wide events. However, volume alone does not establish whether investors are optimistic or pessimistic. It must be interpreted alongside price movements and relevant market information (Lake, 2022).

For Southwest Airlines, examining trading volume alongside stock prices can help identify periods when market activity changed substantially. A sharp increase in volume during a price decline, for example, may indicate heightened investor attention, but additional evidence is needed to determine the reasons behind the movement.

View Figure 2.2: Southwest Airlines’ Stock Trading Volume

Descriptive Statistics: Southwest Airlines Compared With Major U.S. Carriers

Descriptive statistics summarize the central tendency and variability of stock prices and trading volume. This analysis compares Southwest Airlines with United Airlines, Delta Air Lines, and American Airlines using historical data covering July 12, 2017, through July 11, 2022.

The mean represents the arithmetic average of the observations, while the median identifies the middle value when observations are arranged in order. Comparing the mean and median can help reveal whether unusually high or low observations influence the average. Standard deviation measures the dispersion of observations around the mean and can provide insight into variability within the dataset.

When comparing airlines, these statistics should be interpreted carefully. Differences in share prices do not necessarily mean that one company is more valuable or performs better than another. Share prices are affected by the number of shares outstanding and other company-specific factors. Trading volume is also influenced by share structure, liquidity, and investor activity.

For a more meaningful comparison of investment performance, analysts should consider percentage returns, total returns, market capitalization, volatility calculated over a consistent period, and relevant financial measures. These indicators provide a more balanced basis for comparing companies than raw share prices alone.

View the descriptive statistics comparison for Southwest Airlines and other major carriers

Scatterplot and Histogram Analysis of Southwest Airlines Stock

The historical scatterplots indicate that Southwest Airlines experienced substantial changes in its stock prices during the five-year study period. The most notable disruption occurred during the early months of the COVID-19 pandemic in 2020, when restrictions on travel, reduced passenger demand, and uncertainty about the economic outlook placed significant pressure on airline operations and investor confidence.

Airline stocks experienced considerable volatility as investors reacted to changing travel restrictions, government assistance, operating losses, and expectations for the recovery of passenger demand. The subsequent movements in Southwest’s share price reflected both company-specific developments and broader changes in market sentiment. Research and financial reporting from this period also documented substantial movements in airline stocks as investors responded to changing expectations about the pandemic and economic recovery (Johnson, 2020).

The relationship between the stock price and its 100-day moving average provides another perspective on these changes. When the price falls below the moving average, it can indicate short-term weakness relative to the recent trend. However, this pattern should not be interpreted as conclusive evidence that the price will continue to decline. Moving averages are historical indicators and may lag behind rapid market changes (Fidelity, 2022).

MBA FPX 5008 Assessment 4 Presenting Data Analysis Results Effectively

The adjusted closing-price histogram provides information about the distribution of observed prices. If observations are concentrated in certain ranges while a smaller number extend toward lower or higher values, the distribution may be skewed. A negatively skewed distribution, for example, has a longer tail toward lower values, indicating that relatively low observations extend farther from the main concentration of data (Corporate Finance Institute, 2022).

The original analysis reports historical volatility of 86.98%. This figure should be treated as a reported estimate rather than a verified measure unless the calculation method and underlying data are available. Volatility calculations depend on the measurement period, whether daily or weekly returns are used, and whether the result is annualized. A transparent analysis should specify these assumptions before drawing conclusions about risk.

Overall, the charts suggest that Southwest Airlines’ share price and trading activity were affected by major market disruptions during the study period. Nevertheless, price distributions and moving averages should be combined with financial statements, operating metrics, and industry information to provide a more complete assessment.

Factors Affecting Southwest Airlines’ Stock Performance

Several business and economic factors can influence Southwest Airlines’ stock price. Understanding these influences is important when interpreting historical charts and considering the airline’s financial outlook.

COVID-19 and Passenger Demand

The COVID-19 pandemic caused an unprecedented disruption to air travel. Travel restrictions, health concerns, and reduced business and leisure travel affected airline revenues and operations. Investors also faced uncertainty about how quickly passenger demand would recover.

Southwest’s stock movements during this period should therefore be understood within the broader context of the airline industry’s financial stress. Changes in passenger demand, operating expenses, government support, and recovery expectations all contributed to market uncertainty.

Fuel Prices and Operating Costs

Fuel is a major operating expense for airlines. Rising fuel prices can increase the cost of operating flights, putting pressure on profit margins when airlines cannot offset the additional expense through fares or other cost adjustments. Lower fuel prices may provide relief, although the overall effect depends on demand, hedging arrangements, capacity, and other operating costs.

For Southwest, monitoring fuel prices alongside CASM, RASM, and the break-even load factor can help explain changes in operating performance. Fuel prices should not be assessed in isolation because labor costs, aircraft maintenance, airport expenses, and passenger demand also influence profitability.

Economic Conditions and Consumer Spending

Economic growth, inflation, interest rates, and employment conditions can affect demand for air travel. During economic uncertainty, consumers and businesses may reduce discretionary travel, while higher costs can put pressure on airline operating margins.

A weakening economy may therefore create challenges for airlines, particularly when demand declines at the same time that major operating expenses remain elevated. However, the relationship between economic conditions and a specific airline’s stock price is not always direct, because investor expectations and company-specific results also play important roles.

Competition and Market Position

Southwest competes with major U.S. carriers, including American Airlines, Delta Air Lines, and United Airlines. Competition can influence fares, route selection, service quality, capacity, and customer loyalty.

Southwest’s historically cost-conscious operating model and focus on customer experience have contributed to its market identity. However, maintaining a competitive position requires continued attention to operational reliability, customer expectations, employee experience, and cost management. Industry market-share data can provide useful context for evaluating changes in competitive positioning (The Geography of Transport Systems, 2022).

Conclusion: Evaluating Southwest Airlines’ Financial Performance

The historical analysis of Southwest Airlines Co. from July 2017 through July 2022 demonstrates how stock prices, trading volume, and broader market conditions can provide insight into investor sentiment and financial risk. Scatterplots and moving averages help illustrate price trends, while histograms show the distribution of adjusted closing prices and trading activity. Descriptive statistics offer a basis for comparing Southwest with American Airlines, Delta Air Lines, and United Airlines, although percentage returns and risk-adjusted measures are more appropriate for comparing investment performance across companies.

The COVID-19 pandemic was a major source of disruption during the study period, contributing to sharp changes in airline operations, passenger demand, and investor expectations. Fuel costs, economic uncertainty, competition, and customer demand also remain important factors when assessing airline performance.

MBA FPX 5008 Assessment 4 Presenting Data Analysis Results Effectively

The original assessment noted that Southwest had regained its pre-pandemic employee count by July 2022. Southwest’s newsroom reported that the company surpassed its 2019 employee levels in July 2022, providing evidence of workforce recovery during that period (Southwest Airlines, 2022). However, workforce growth alone does not establish that financial performance or share prices have fully recovered.

Similarly, changes in global oil production may influence fuel prices, but their effect on Southwest depends on broader supply-and-demand conditions, refining costs, market expectations, and the airline’s fuel purchasing arrangements. Investors should avoid assuming that a single geopolitical or economic development will necessarily cause the stock price to rise.

The analysis ultimately supports a cautious, evidence-based approach to evaluating Southwest Airlines. Historical trends can help identify periods of volatility and changes in market behavior, but investment decisions should also consider current financial statements, operating performance, competitive conditions, valuation, and individual risk tolerance.

Recommendations

Southwest Airlines should continue strengthening its cost management, operational reliability, customer experience, and financial resilience. Given the airline industry’s exposure to fuel-price fluctuations and economic uncertainty, management should monitor operating costs closely and evaluate how changes in demand may affect capacity and profitability.

The company should also continue reviewing customer needs, route performance, workforce requirements, and technology investments. Strong employee engagement and operational execution can contribute to service consistency and customer loyalty, both of which are important in a competitive airline market (Bova, 2020).

For investors and analysts, the following practices can improve the quality of a stock assessment:

• Compare percentage returns and volatility over consistent time periods rather than relying solely on nominal share prices.

• Review revenue, operating income, cash flow, debt levels, and liquidity alongside stock-market indicators.

• Monitor airline-specific measures such as available seat miles, revenue per available seat mile, cost per available seat mile, and load factor.

• Interpret trading volume and moving averages as supporting indicators rather than stand-alone forecasts.

• Consider fuel prices, passenger demand, competitive pressures, and macroeconomic conditions when evaluating the airline’s outlook.

These recommendations support a more comprehensive understanding of Southwest Airlines’ performance. They are analytical considerations, not a guarantee of investment returns or a personalized recommendation to buy or sell the stock.

Frequently Asked Questions

What is Southwest Airlines’ business strategy?

Southwest Airlines has historically followed a cost-conscious business strategy focused on affordable air travel, operational efficiency, and customer experience. Its competitive approach has emphasized accessible fares and a distinctive service model, although its strategy and operations can evolve as market conditions change.

Which financial ratios are useful for analyzing Southwest Airlines?

Useful measures include the quick ratio, return on assets, and debt-to-capitalization ratio. These indicators help assess short-term liquidity, asset efficiency, and financial leverage. They should be considered alongside airline-specific operating measures and the company’s financial statements.

What does a 100-day moving average show in stock analysis?

A 100-day moving average calculates the average stock price over a rolling 100-day period. It smooths short-term price fluctuations and helps analysts observe the broader direction of a historical trend. It is a lagging indicator and cannot reliably predict future stock prices on its own.

Why did airline stocks experience significant volatility in 2020?

Airline stocks experienced significant volatility in 2020 because the COVID-19 pandemic disrupted travel, reduced passenger demand, and created uncertainty about airline revenues and financial stability. Investors also reacted to changing restrictions, government support, and expectations for economic recovery.

How does trading volume affect stock analysis?

Trading volume indicates how many shares were exchanged during a particular period. Higher volume may reflect increased investor attention or stronger participation in a price movement. However, volume does not independently indicate whether a stock is likely to rise or fall.

Why are airline-specific financial metrics important?

Airline-specific measures help explain operating performance in a capital-intensive and cost-sensitive industry. Available seat miles measure capacity, revenue per available seat mile evaluates revenue generation, cost per available seat mile measures operating cost efficiency, and the break-even load factor estimates the passenger occupancy needed to cover relevant operating costs.

Does historical stock performance predict future returns?

No. Historical performance can help identify past trends, volatility, and reactions to major events, but it does not guarantee future results. Investors should also examine current financial information, valuation, industry conditions, and their own financial objectives and risk tolerance.

References

Bova, T. (2020, November 17). Southwest on the importance of employee experience. Forbes. https://www.forbes.com/sites/salesforce/2020/11/17/southwest-on-the-importance-of-employee-experience/

Corporate Finance Institute. (2022, May 7). Negatively skewed distribution. https://corporatefinanceinstitute.com/resources/knowledge/other/negatively-skewed-distribution/

Fidelity. (2022, June 17). Moving averages. https://www.fidelity.com/viewpoints/active-investor/moving-averages

Johnson, M. (2020, June 4). Why did airline stocks skyrocket on Thursday? Zacks Investment Research. https://www.zacks.com/stock/news/964436/why-did-airline-stocks-skyrocket-on-thursday

Lake, R. (2022, April 12). Should you pay attention to a stock’s trading volume? SmartAsset. https://smartasset.com/financial-advisor/high-volume-stocks

MBA FPX 5008 Assessment 4 Presenting Data Analysis Results Effectively

Maverick, J. B. (2022, March 28). Key financial ratios for airline companies. Investopedia. https://www.investopedia.com/articles/active-trading/082615/key-financial-ratios-analyze-airline-companies.asp

Southwest Airlines. (n.d.). Purpose, vision, and the Southwest way. Southwest Airlines Investor Relations. https://www.southwestairlinesinvestorrelations.com/our-company/purpose-vision-and-the-southwest-way

Southwest Airlines. (2022, July 15). Southwest Airlines achieves hiring milestone by increasing employee count beyond pre-pandemic 2019 levels. Southwest Airlines Newsroom. https://www.swamedia.com/releases/southwest-airlines-achieves-hiring-milestone-by-increasing-employee-count-beyond-pre-pandemic-2019-levels

Southwest Airlines. (n.d.). Southwest corporate fact sheet. Southwest Airlines Newsroom. https://www.swamedia.com/pages/corporate-factsheet

The Geography of Transport Systems. (2022, June 25). Market share of the top American airlines, 1977–2022. https://transportgeography.org/contents/chapter5/air-transport/airline-market-share-united-states/

The White House. (2022, July 15). Fact sheet: Results of bilateral meeting between the United States and the Kingdom of Saudi Arabia. https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/15/fact-sheet-results-of-bilateral-meeting-between-the-united-states-and-the-kingdom-of-saudi-arabia/

Yahoo Finance. (2022, July 12). Southwest Airlines Co. (LUV) historical data. https://finance.yahoo.com/quote/LUV/history/

MBA FPX 5008 Assessment 4 Presenting Data Analysis Results Effectively

Yahoo Finance. (2022, July 17). American Airlines Group Inc. (AAL) historical data. https://finance.yahoo.com/quote/AAL/history/

Yahoo Finance. (2022, July 17). Delta Air Lines, Inc. (DAL) historical data. https://finance.yahoo.com/quote/DAL/history/

Yahoo Finance. (2022, July 17). United Airlines Holdings, Inc. (UAL) historical data. https://finance.yahoo.com/quote/UAL/history/

Zacks Investment Research. (2022, July 17). Southwest Airlines (LUV): Key company metrics. https://www.zacks.com/stock/research/LUV/key-company-metrics