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Dallas, Texas-based Southwest Airlines Co. (LUV - Analyst Report) posted a rise in traffic for Feb 2014. The traffic – measured in revenue passenger miles (RPMs) – came in at 7.14 billion, up 1.2% from 7.06 billion recorded in the comparable month a year ago.

However, on a year-over-year basis, consolidated capacity (or available seat miles/ASMs) decreased 1.7% to 9.14 billion. The load factor or percentage of seats filled by passengers increased to 78.1% from 75.8% in Feb 2013. The market reacted positively to the news as the stock gained 2.16% on Wednesday on NYSE.

PRASM (passenger revenue per available seat miles) increased approximately 5% in Feb 2014. The carrier gained approximately 1% in PRASM due to the winter storms.

In the first couple months of 2014, Southwest generated RPMs of 14.56 billion (up 1.7% year over year) and ASMs of 18.87 billion (down 2.2% year over year). Load factor moved up 77.2% from the year-ago figure of 74.2%.

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 27 pairs of slots. These were as part of U.S. Airways Group’s merger with American Airlines to form American Airlines Group Inc. (AAL - Snapshot Report). Southwest Airlines aims to initiate services at LGA from May 2014.

Southwest Airlines’ slot win at New York provides it with scope for expansion in the city and gives it a competitive edge over JetBlue Airways Corp. (JBLU - Analyst Report) and Delta Air Lines Inc. (DAL - Analyst Report).

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.

Additionally, the carrier announced that it will offer non-stop service to domestic destinations from Dallas Love Filed airport from where flight limitations will finally be lifted. We believe these initiatives along with winning of slots at LGA and DCA are expected to create tailwinds for the company going forward. Southwest Airlines currently holds a Zacks Rank #1 (Strong Buy).

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