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Dallas, Texas-based Southwest Airlines Co. (LUV - Analyst Report) witnessed higher traffic and capacity in May 2013. The results were supported by an increased number of passengers traveled and trips conducted.

The company’s traffic – measured in revenue passenger miles (RPMs) – was 9.34 billion for the reported month, up 4.2% from 8.97 billion recorded a year ago. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) moved up 3.4% to 11.41 billion. The load factor or percentage of seats filled by passengers improved marginally to 81.9% from 81.3% in May 2012.

For the first five months of this year, Southwest generated RPMs of 41.84 billion (up 1.4% year over year) and ASMs of 53.44 billion (up 1.9% year over year). Load factor was 78.3%, 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 unveiled an aircraft purchase order restructuring initiative that is expected to induce cost savings in the coming five years. The company switched five orders for The Boeing Company’s (BA - Analyst Report) 737-700 into 737-800s and abandoned a set of five purchase orders of Boeing Next Generation jets each in 2014 and 2015.

In an attempt to enhance shareholder value, Southwest announced a 400% hike in quarterly dividend to 4 cents per share from a penny per share. On an annualized basis, the total amount of dividend payout is expected to be more than $100 million. Additionally, the company also raised its stock repurchase plan to $1.5 billion from the existing program of $1 billion.

Southwest – which operates along with other prominent players such as United Continental Holdings (UAL - Analyst Report) and JetBlue Airways (JBLU - Analyst Report) – currently holds a Zacks Rank #2, implying a Buy rating.

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