Leading U.S. passenger carrier Southwest Airlines Co. (LUV - Analyst Report) announced that it will offer non-stop service to domestic destinations from Dallas Love Filed airport from where flight limitations will finally be lifted.
Starting Oct 13, Southwest plans to operate non-stop flights to Baltimore, Las Vegas, Denver, Orlando and Florida from Dallas. From Nov 2, non-stop services from Dallas will be extended to 10 other cities, which include popular destinations like Atlanta, New York, Washington and Los Angeles among others.
Back in 1979, flight restrictions were imposed on Dallas Love Field under the Wright Amendment which is a federal law aimed at supporting the city’s other airport – Fort Worth International Airport. The restriction will end in Oct 2014, creating more competition in Dallas where the newly formed American Airlines Group Inc. (AAL - Snapshot Report) has a strong foothold. Post expiry, Southwest expects to fly directly to 41 more states from this popular destination.
Recently, Southwest won bids to purchase 27 take-off and landing slots at Reagan National Airport (DCA) in Washington that will increase the carrier’s daily departure from DCA to 44 from the present 17. Rival JetBlue Airways Corp. (JBLU - Analyst Report) won the right for 12 such slots in the same airport. Both the transactions still require the green signal from the U.S. justice department.
Earlier in Dec 2013, Southwest acquired 22 take-off and landing slots at New York’s La Guardia airport (LGA). The slot divestment is part of the mega merger deal between American Airlines and U.S. Airways Group Inc. which required the carriers to give up 52 take-off and landing slots at DCA and 17 pairs at LGA.
The last few months have been really fruitful for Southwest. Apart from slot purchases the company delivered a stellar fourth quarter of 2013, beating the Zacks Consensus Estimate on both lines. The company even plans to fly internationally, under its own brand as it nears the integration of AirTran with itself. These recent slew of positive news makes us bullish on Southwest for 2014.
We believe Southwest could curb the dominance of American Airlines thus getting a significant share in the Dallas market if it could price its tickets competitively. However, consumers will be the biggest gainers from the heightened competition as it will result in low average fares.
Southwest sports a Zacks Rank #1 (Strong Buy). Another stock worth considering within this sector is United Continental Holdings Inc. (UAL - Analyst Report), which carries the same Zacks Rank as Southwest.