Southwest Airlines Co.
) posted a slight drop in traffic for Jul 2013. The company's
traffic - measured in revenue passenger miles (RPMs) - was 9.98
billion for the reported month, down 0.7% from 10.04 billion
recorded a year ago. On a year-over-year basis, consolidated
capacity (or available seat miles/ASMs) moved up 0.6% to 11.95
billion. The load factor or percentage of seats filled by
passengers dropped to 83.5% from 84.6% in Jul 2012.
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For the first seven months of this year, Southwest generated RPMs
of 61.66 billion (up 1.2% year over year) and ASMs of 76.98
billion (up 1.6% year over year). Load factor was 80.1%,
reflecting a decline of 40 basis points.
We believe that Southwest remains committed to sustain its brand
and operational excellence based on five major strategic actions.
The company with its cost-efficient business model targets to
expand its network through the transition of AirTran aircraft and
the addition of new domestic and international destinations.
To combat further cost increases, Southwest is rightsizing its
fleet. Over the last couple of months, the airline placed three
The Boeing Company
) 737-800s into service and retired two Boeing 737-300s.
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. The results, however, improved from the
prior-year quarter adjusted earnings of 36 cents per share on
fleet re-designing, expansion of network and less fuel expense.
Southwest - which operates along with other prominent players
United Continental Holdings
)) - currently holds a Zacks Rank #3, implying a Hold rating.
We apprehend that high operating costs associated with
maintenance, salaries, wages and airport fees plus new
advertising policy along with intense competition and heavy
investments are expected to limit the upside potential of the