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Southwest's (LUV) Load Factor Declines Again in November

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Southwest Airlines (LUV - Free Report) reported traffic results for November. Traffic (measured in revenue passenger miles or RPMs) increased 4.9% to around 11.33 billion while capacity or available seat miles (ASMs) expanded 6.5% to 13.4 billion.

However, load factor (percentage of seats filled by passengers) deteriorated 130 basis points (bps) to 84.5% in the month as capacity expansion outweighed traffic growth. Meanwhile, passenger count grew 3.2% to 14.01 billion.

In the first 11 months of 2018, Southwest witnessed a 3.3% rise in RPMs to 122.25 billion. Also, ASMs climbed 3.8% to 146.23 billion. As a result, load factor contracted 40 bps to 83.6%. However, passenger count rose 3.9% to 149.99 billion.

The carrier has been struggling with overcapacity woes of late. The low-cost airline is perhaps still reeling under the effects of the flight 1380 incident in April. Ever since the incident, the airline has recorded a drop in load factor every successive month. This persistent fall in load factor certainly does not bode well for the company as it signals low profitability prospects.


Zacks Rank & Key Picks

Southwest carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Air France-KLM (AFLYY - Free Report) , International Consolidated Airlines Group (ICAGY - Free Report) and Spirit Airlines (SAVE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Shares of Air France-KLM and Spirit have surged more than 26% and 100%, respectively, in the past six months. Meanwhile, the International Consolidated Airlines flaunts an impressive earnings history, having outdone the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 92.9%.

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