Citi warns on Southwest Airlines elevated capital expenditures heading into Q4

Yahoo Finance Live examines Citi's forecasts warning on Southwest Airlines Q4 capex, tied to new pilot wages and elevated travel costs.

Video transcript

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SEANA SMITH: Time for our "Triple Play," three stocks that we're watching in the final 30 minutes of trading. We have Southwest, GM, and Apple. Pras Subramanian is also here with us to break down some of these biggest movers. Let's kick it off with my pick, and that is Southwest. The stock moving to the downside today, off nearly 5%. Citi warning of higher CapEx in the fourth quarter, noting the potential issue of pilot pay. That could be an issue here coming forward for these airlines.

This update from Citi coming as Southwest holds its investor day, where it kept its 2023 and fourth quarter outlook largely unchanged. It did reinstate its dividend at $0.18 a share. That dividend had been suspended during the pandemic. Pras, lots of uncertainty around these airlines, what exactly demand is going to look like going forward after we get past this kind of pent-up COVID demand. People will pay anything to travel right now. Prices are still very, very high. Questions about whether or not people are going to still be willing to pay those prices in a couple of months from now.

PRAS SUBRAMANIAN: You know, I saw that pre-pan-- or Thanksgiving air travel returned to pre-pandemic levels. Lots of people traveling. That leisure travel is back. Business travel coming on soon. It's funny you mention that they're reinstating that dividend. They have that while the pilots are picketing over new higher wages. So you have that kind of dichotomy of companies saying, hey, we want to reinstate the dividend, but they ordered a bunch of new Boeing planes that are going to actually eat into cost, too. So that's another thing to watch there for Southwest.