Several strategies like fleet restructuring, introduction of international services and capacity management are poised to drive Southwest Airlines' top and bottom line. Substantial growth opportunities, particularly within the domestic market, also bode well for the carrier. Winning of slots and expansion of operations at the Reagan and LaGuardia airports will further boost its capacity and network presence. Additionally, Southwest Airlines continues to boost shareholders' return through dividends and share buybacks. Further, the company flagged off flights from Dallas Love Field and constructed a new facility in Houston Hobby airport which will significantly enhance its international operations. We are also positive on Southwest Airlines' acquisition of AirTran Airways. Based on these factors, we maintain our Outperform recommendation on the stock. Our target price is $46 per share.
Based in Dallas, TX, Southwest Airlines Co. (LUV) is a passenger airline that provides scheduled air transportation in the United States. It primarily provides short-haul, high frequency, point-to-point and low-fare services. Southwest Airlines is a leisure-oriented point-to-point carrier largely in Las Vegas, Chicago (Midway) and Phoenix. The company's point-to-point route structure include services to and from many secondary or downtown airports such as Dallas Love Field, Houston Hobby, Chicago Midway, Baltimore-Washington International, Burbank, Manchester, Oakland, San Jose, Providence, Ft. Lauderdale/Hollywood, and Long Island Islip airports.
Southwest Airlines is one of the world's most profitable low-cost airlines that consistently offers the lowest fares. The company sells frequent flyer credits and related services to companies participating in its Rapid Rewards frequent flyer program, including credit card companies, hotels, telecommunication companies and car rental agencies.
In May 2011, Southwest Airlines completed the acquisition of AirTran Holdings, which now operates as a wholly owned subsidiary under the name AirTran Airways.