As winter bids adieu, low cost carrier,
Southwest Airlines
(
LUV
) is gearing up for summer travel sales. The carrier has announced
discounted fares up to $69.00 on a one way trip that can e availed
on 10 days advance booking between April 3 and June 27, 2012. The
discounted tickets are available on specific days like Tuesdays and
Wednesdays to select destinations.
Southwest remains benefited from the seasonal impact on its
business. Summer travel boosted revenue growth last year on higher
leisure travel demand. Additionally, load factor also increased
reflecting higher occupancy on flights compared with summer
2010.
However, Southwest's outlook remains lackluster for this year
with uncertainties hovering over the macroeconomic environment.
According to the International Air Transport Association, global
airline passenger growth will be around 4% in this year compared
with 6% in 2011. Further, profitability of air carriers are also
rated down with an estimated overall profit of $3.5 billion for
this year, reflecting a steep decline from $6.9 billion in 2011 and
$16 billion in 2010.
Therefore, carriers are banking on discounted airfares to
attract passengers. However, the steeply rising fuel prices remain
unfavorable for airfares and airlines are left with limited pricing
flexibility.
We believe the peak season revenues remain crucial for Southwest
and other carriers like
United Continental Holdings Inc.
(
UAL
),
Delta Air Lines
(
DAL
),
US Airways Group Inc.
(
LCC
) and
JetBlue Airways Corporation
(
JBLU
) to offset staggering fuel costs and derive substantial benefits
by attracting more travelers on discounted tickets.
Currently, we maintain our long-term Neutral recommendation on
Southwest supported by a short-term (1-3 months) Zacks #3 (Hold)
Rank.
DELTA AIR LINES (
DAL
): Free Stock Analysis Report
JETBLUE AIRWAYS (
JBLU
): Free Stock Analysis Report
US AIRWAYS GRP (
LCC
): Free Stock Analysis Report
SOUTHWEST AIR (
LUV
): Free Stock Analysis Report
UNITED CONT HLD (
UAL
): Free Stock Analysis Report
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