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Consistent with its not-so-favorable traffic figures over the last three months, Southwest Airlines Co. (LUV - Analyst Report) witnessed less traffic and capacity for Feb 2013.

The company’s traffic – measured in revenue passenger miles (RPMs) – was 7.06 billion for the reported month, down 2.3% from 7.23 billion recorded a year ago. On a year-over-year basis, consolidated capacity (or available seat miles/ASMs) moved down 3.1% to 9.30 billion. The results were negatively impacted by a drop in the number of passengers traveled and trips undertaken.

The load factor or percentage of seats filled by passengers, however, went up marginally to 75.8% from 75.2% in Feb 2012. Passenger revenue per available seat mile (PRASM) also improved about 2.0% year over year.

For the first two months of this year, Southwest generated RPMs of 14.31 billion (down 2.0% year over year) and ASMs of 19.29 billion (down 1.3% year over year), while load factor was 74.2%, reflecting a decline of 60 basis points.

The top-notch passenger airline focuses on a number of initiatives to increase revenue and reduce costs in the coming months. Apart from fleet rightsizing, the company is concentrating on expanding its network routes.

Southwest fortified its foothold in the state of Missouri with three daily nonstop flights from Branson to Dallas Love Field, Houston Hobby, and Chicago Midway. There will also be nonstop flights to Orlando only for Saturdays. The company’s foray into Branson highlights the benefits from the acquisition of AirTran Airways that was operating in the aforesaid region since 2009.

Dallas, Texas headquartered Southwest Airlines along with AirTran operated 694 aircraft by The Boeing Company (BA - Analyst Report) serving 97 cities in 41 states, as of Dec 31, 2012.

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 #3, implying a Hold rating.

Despite these headwinds such as unstable economic conditions, competitive pressures, regulatory interferences and technological failures, we remain encouraged by Southwest’s cost-cutting measures, diversification into untapped territories, revenue management program and the launch of attractive service offerings.  

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