Low-cost carrier Southwest Airlines Co. (LUV Quick QuoteLUV - Free Report) announced strong traffic numbers for May 2016, with revenue passenger miles (RPMs: a measure of air traffic) improving 6.4% on a year-over-year basis to 10.9 billion. Available seat miles (ASMs: a measure of capacity) also rose 4.6% to 12.6 billion.

Another important metric – load factor (% of seats filled by passengers) – improved 140 basis points (bps) to 85.8% during the month as traffic growth outpaced capacity expansion. Interestingly, this mark the highest ever load factor recorded by the Dallas-based airline company in the month of May.

In the first five months of 2016, Southwest Airlines generated RPMs of 49.6 billion (up 8.0% year over year) and ASMs of 60.3 billion (up 7.2%), leading to a total load factor of 82.2% (up 60 bps).

Southwest Airlines continues to expect a modest increase in operating revenue per ASM (RASM: a key measure of unit revenue) in the second quarter of 2016.

The company reported encouraging first-quarter 2016 results, wherein both the top and the bottom line surpassed the Zacks Consensus Estimate. Quarterly revenues were up 9.3% year over year to $4,826 million and also above the Zacks Consensus Estimate of $4,818 million. On a year-over-year basis, Passenger and Other revenues increased 5.3% and 101%, respectively, while Freight revenues dropped 4.5%.

Zacks Rank & Key Picks

Southwest Airlines currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include SkyWest Inc. (SKYW Quick QuoteSKYW - Free Report) , Air France-KLM SA (AFLYY Quick QuoteAFLYY - Free Report) and GOL Linhas S.A. . Both SkyWest and Air France-KLM sport a Zacks Rank #1 (Strong Buy) while GOL Linhas carries a Zacks Rank #2 (Buy).

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