Southwest Airlines Co. (LUV - Free Report) posted mixed traffic numbers for December 2018. In spite of traffic increasing on the back of strong demand for air travel, load factor declined as traffic growth was outweighed by capacity expansion.
Traffic (measured in revenue passenger miles or RPMs) rose 3.3% to around 11.07 billion, while capacity or available seat miles (ASMs) expanded 5.4% to 13.56 billion.
However, load factor (percentage of seats filled by passengers) declined 170 basis points (bps) to 81.6% in the month as traffic growth was outpaced by capacity expansion. Additionally, passenger count grew 2.1% to 13,619,622.
At the end of 2018, Southwest Airlines witnessed a 3.3% rise in RPMs to 133.32 billion. Also ASMs rose 3.9% to 159.8 billion. As a result, the load factor contracted 50 bps to 83.4%.
In spite of the increase in December traffic, the low-cost carrier has been struggling against capacity-related woes of late. We believe that Southwest Airlines is perhaps reeling under the effects of the flight 1380 incident in April. Ever since the incident, the carrier has reported a decline in load factor every successive month, which does not bode well.
Zacks Rank & Stocks to Consider
Southwest Airlines carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the Zacks Transportation sector are Spirit Airlines, Inc. (SAVE - Free Report) , Azul S.A. (AZUL - Free Report) and Frontline Ltd. (FRO - Free Report) . While Frontline carries a Zacks Rank #2 (Buy), Spirit Airlines and Azul sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Frontline, Spirit Airlines and Azul have gained 5.5%, 52.5% and 70.6% in the past six months, respectively.
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