Key Takeaways
- Southwest Airlines stock is on the radar Monday after an engine cover detached during take-off on a Houston-bound flight.
- The latest mishap follows two other Southwest safety incidents over the past month.
- Southwest lowered its current-quarter and full-year outlook in March, citing reduced capacity from fewer Boeing deliveries.
- The Southwest Airlines share price may find support around $22.70 from the November 2023 low, and resistance near $38 from the July 2023 countertrend peak.
Shares in low-cost carrier Southwest Airlines (LUV) may face turbulence Monday after the Federal Aviation Administration (FAA) reported on Sunday afternoon that one of the airline’s Boeing 737s lost an engine cover during takeoff, which then struck a wing flap.
The incident occurred on Southwest Flight 3695 at Denver International Airport just after 8 a.m. local time, forcing the 737-800 jet to return to the gate, with customers safely transferred onto a replacement aircraft to complete their journey to Houston’s William P. Hobby Airport.
Southwest has not yet confirmed when the plane, which entered service in 2015, last had maintenance but said it was investigating the incident. “Our maintenance teams are reviewing the aircraft,” the airline said. The FAA also said it is investigating the mishap.
The latest safety concern for the carrier comes just days after the airline reported that an engine fire caused one of its planes to cancel takeoff and return to the gate in Lubbock, Texas. It also follows an incident in March where one of the airline’s planes veered off course as it approached New York’s LaGuardia Airport, causing it to come into close proximity with an air traffic control tower during landing.
The incident comes at a time of increased scrutiny for Boeing (BA) after an accident in January where a door plug blew off a Alaska Airlines (ALK) 737 Max 9 midflight, prompting the FAA to bar the airplane maker expanding its 737 Max jet production until it’s satisfied with its quality controls. Last month, Southwest, which flies an all-Boeing 737 narrow-body fleet, said that fewer jet deliveries this year had led it in part to reduce its current-quarter and full-year outlook due to reduced capacity.
Taking a look at the weekly chart, the Southwest Airlines share price has remained entrenched within a downtrend since falling below the 200-week moving average in July last year.
Looking ahead, investors should monitor if the stock can hold above a key trendline stretching back to May 2021. A breakdown below this closely-watched indicator could see the price retest the November 2023 low around $22.70, while a move higher may find selling pressure near the July 2023 countertrend peak around $38. Interestingly, both of these levels also correspond with pandemic-era support and resistance areas.
Southwest shares finished last week at $28.34 and are down 19% from their closing high for the year of $34.83 set on March 7.
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As of the date this article was written, the author does not own any of the above securities.