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Southwest Airlines (LUV) April Traffic Dips on Low Demand

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Southwest Airlines Co. (LUV - Free Report) reported disappointing traffic results for April. Traffic (measured in revenue passenger miles or RPMs) slipped 0.3% to around 11.2 billion while capacity or available seat miles (ASMs) inched up 1.5% to 13.57 billion. The decline in traffic is due to softness in bookings following the fatal engine failure last month.

Also, load factor (percentage of seats filled by passengers) deteriorated 150 basis points (bps) to 82.5% in the month as capacity expanded while traffic contracted. However, passenger count grew 2.4% to 13.78 billion.

In the first four months of the year, Southwest Airlines witnessed a 2.6% rise in RPMs to 41.64 billion. Also, ASMs nudged up 1.7% to 50.94 billion. As a result, load factor expanded 80 bps to 81.8%. Moreover, passenger count increased 4.7% to 51.32 billion.

The company grabbed news headlines of late after it announced a detailed plan to offer flights connecting Hawaii with California. The carrier will initiate these low-fare services, which will be way more reasonable than those currently operated by Hawaiian Airlines, the subsidiary of Hawaiian Holdings, Inc. HA. (Read more: Southwest a Step Closer to Hawaii: Hawaiian Holdings Slides).

Zacks Rank & Key Picks

Southwest Airlines carries a Zacks Rank #5 (Strong Sell).

Two better-ranked stocks in the airline space are SkyWest, Inc. SKYW and Cathay Pacific Airways Ltd. CPCAY. While SkyWest sports a Zacks Rank #1 (Strong Buy), Cathay Pacific Airways carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of SkyWest and Cathay Pacific Airways have rallied more than 56% and 14%, respectively, in a year.

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