Southwest Airlines July Traffic Grows on Packed Flights - Analyst Blog

Dallas, TX-based Southwest Airlines Co. ( LUV ) posted a healthy rise in traffic for July 2014. The month's traffic - measured in revenue passenger miles (RPMs) - came in at 10.6 billion, up 6.6% from almost 10 billion recorded in the comparable period a year ago.

Meanwhile, on a year-over-year basis, consolidated capacity (or available seat miles/ASMs) increased 2.6% to 12.3 billion. Load factor came in at 86.7%, up 320 basis points (bps) from the year-over-year equivalent of 83.5%. PRASM (passenger revenue per available seat miles) went up approximately 4% in the reported month.

In the first seven months of 2014, Southwest Airlines generated RPMs of 63.4 billion (up 2.8% year over year) and ASMs of 76.8 billion (down 0.2%), leading to a load factor of 82.5% (up 240 bps).

The company recently reported strong second-quarter 2014 results with both its top and bottom line beating the respective Zacks Consensus Estimate. Based on the current revenue and ticket booking trend, the company's revenue outlook for the third quarter remains strong.

Notably, after operating for several decades within the U.S. domestic market, Southwest Airlines is finally flying into international territory, with flights to the Caribbean. After the initial round of flights, the carrier plans to expand its international operations to 50 more destinations across the world, with Mexico and Dominican Republic next in line.

Moreover, the slot wins at the LaGuardia (LGA) airport in New York and at Reagan National Airport (DCA) in Washington, D.C., from American Airlines Group Inc. ( AAL ), has widened Southwest Airlines' scope for expansion in the cities.

Additionally, the carrier will be able to offer several domestic non-stop services in and out of Dallas Love Field as flight restrictions (Wright Amendment) therein will be removed in less than three months' time from now. We believe such expansion initiatives along with the slot wins will create tailwinds for the company going forward.

Southwest Airlines currently sports a Zacks Rank #1 (Strong Buy). Similar-ranked stocks worth considering within the sector are Republic Airways Holdings Inc. ( RJET ) and Spirit Airlines Inc. ( SAVE ).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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