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LUV Stock: Southwest Airlines Co Dips

Wayne Duggan

Southwest Airlines Co (ticker: LUV) shares are selling off on Friday after the company reported a number of key metrics from the month of February.

On Friday morning, Southwest reported 8.7 billion total February revenue passenger miles, a 1.1 percent increase from a year ago. In addition to the bump in RPMs, the airline also reported a 1.2 percent uptick in available seat miles (ASM) from 10.9 billion to 11.0 billion.

Load factor, a measure of how efficiently an airline utilizes its capacity, was flat compared to last year at 79 percent.

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Despite the positive changes from a year ago, Southwest cut its estimate for first-quarter operating revenue per ASM (RASM). Previously, Southwest had indicated that it anticipated first-quarter RASM growth to come in between zero and -1 percent compared to a year ago. The company is now calling for a decline of 2 to 3 percent.

RASM is a metric used to determine how efficiently an airline is utilizing its passenger capacity to generate revenue.

Southwest Airlines shareholders have had a rough go of it so far in March after finishing 2016 on a strong note. In the past two quarters, billionaire investing icon Warren Buffett reported new stakes in Southwest Airlines, Delta Air Lines ( DAL), American Airlines Group ( AAL) and United Continental Holdings ( UAL).

In the past, Buffett has avoided airlines, even calling them "a death trap for investors" in a 2013 letter to investors. But Buffett's change of heart led Morgan Stanley to speculate Buffett's Berkshire Hathaway ( BRK.A, BRK.B) could acquire Southwest Airlines entirely.

Unfortunately for Southwest investors, Buffett recently told CNBC "we don't want to go over 10 percent" on airlines.

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With a potential Buffett buyout no longer in play and the company's first-quarter RASM estimates headed in the wrong direction, Southwest stock seems to have lost its positive momentum for now.

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