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Southwest Airlines March Traffic Grows

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Dallas, TX-based Southwest Airlines Co. (LUV) posted a rise in traffic for March 2014. The traffic – measured in revenue passenger miles (RPMs) – came in at 9.60 billion, up 1.6% from 9.44 billion recorded in the comparable month a year ago. Meanwhile, on a year-over-year basis, consolidated capacity (or available seat miles/ASMs) increased 0.8% to 11.60 billion.

The load factor or percentage of seats filled by passengers increased to 82.7% from 82.0% in March 2013. PRASM (passenger revenue per available seat miles) increased approximately 1% in the reported month.

In the first three months of 2014, Southwest generated RPMs of 24.15 billion (up1.7% year over year) and ASMs of 30.47 billion (down1.1% year over year). Load factor, moved up 79.3%, from the year-ago figure of 77.1%.

Southwest Airlines acquired 12 pairs of slots at the LaGuarida (:LGA) airport in New York and has won bids to purchase 27 pairs of slots at Reagan National Airport (DCA) in Washington. These were as part of U.S. Airways Group’s merger with American Airlines to form American Airlines Group Inc. (AAL). Southwest Airlines aims to initiate services at LGA from May 2014.

Southwest Airlines’ slot win at New York provides it with the scope for expansion in the city and gives it a strong foothold against JetBlue Airways Corp. (JBLU) and Delta Air Lines Inc. (DAL). Further, the company has decided to extend daily departures from DCA to 44 from the current 17, thus increasing its operations from the airport more than 2.5 times. Apart from expanding Southwest’s reach to 14 destinations, the new low-fare, non-stop services from DCA will strengthen the carrier’s operations in the capital city.

With its cost-efficient business model, the company targets to expand its network through the integration of AirTran aircraft and the addition of domestic and international destinations. Further, the company announced its intention to target markets where rivals have trimmed their operations.

The carrier also announced that it will offer non-stop service to domestic destinations from Dallas Love Field airport from where flight limitations will finally be lifted. We believe these initiatives along with the slot wins will create tailwinds for the company going forward. Southwest Airlines currently holds a Zacks Rank #1 (Strong Buy).

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