Southwest Airlines Co.
) posted a drop in traffic for Aug 2013. The company's traffic -
measured in revenue passenger miles (RPMs) - was 9.17 billion for
the reported month, down 2.0% from 9.35 billion recorded in the
comparable month a year ago. On a year-over-year basis,
consolidated capacity (or available seat miles/ASMs) moved up
1.4% to 11.27 billion. The load factor or percentage of seats
filled by passengers dropped to 81.3% from 84.2% in Aug 2012.
For the first eight months of this year, Southwest generated
RPMs of 70.83 billion (up 0.8% year over year) and ASMs of 88.25
billion (up 1.6% year over year). Load factor was 80.3%,
reflecting a year-over-year decline of 60 basis points.
Southwest focuses on a number of initiatives to increase
revenues and reduce operational costs over the next three years.
With its cost-efficient business model, the company targets to
expand its network through the integration of AirTran aircraft
and the addition of new domestic and international
To combat further cost escalations, Southwest is rightsizing
its fleet. During the first half of 2013, the airline took
delivery of nine
The Boeing Company
) 737-800s, two used Boeing 737-700 and retired three Boeing
However, fuel price instability remains one of the major risks
for the company as the cost of fuel is largely unpredictable.
Furthermore, Southwest continues to implement substantial
technological changes within its operating systems, which could
affect its earnings in case of any system failure or
The U.S. low-cost carrier reported second quarter 2013
adjusted earnings of 38 cents per share, a penny short of the
Zacks Consensus Estimate, while revenues of $4.6 billion were in
line with the Zacks Consensus Estimate.
Southwest - which operates along with other prominent
passenger carriers such as
United Continental Holdings Inc.
JetBlue Airways Corporation
) - currently holds a Zacks Rank #3 (Hold) rating.
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