Southwest Airlines June Traffic Up 6.8% On Packed Flights

Low-cost carrier Southwest Airlines Co. (NYSE:LUV) announced strong traffic numbers for Jun 2016, with revenue passenger miles (RPMs: a measure of air traffic) improving 6.8% on a year-over-year basis to 11.5 billion. Available seat miles (ASMs: a measure of capacity) also rose 5.4% to 13.1 billion.

Another important metric – load factor (% of seats filled by passengers) – improved 120 basis points (bps) to 87.4% during the month as traffic growth outpaced capacity expansion. Interestingly, this marks the highest load factor for the Dallas-based airline company in the month of June.

In the first six months of 2016, Southwest Airlines generated RPMs of 61.1 billion (up 7.8% year over year) and ASMs of 73.5 billion (up 6.9%), leading to a total load factor of 83.2% (up 70 bps).

Southwest Airlines continues to expect operating revenue per ASM (RASM: a key measure of unit revenue) increase of less than 1% in the second quarter of 2016, on a year-over-year basis.

Good Tidings

The U.S. Department of Transportation (DOT) came up with encouraging news for Southwest Airlines by including the carrier among the eight U.S. airlines to fly to Havana from 10 different U.S. cities. The latest award permits the carrier to operate two daily nonstop flights from Ft. Lauderdale-Hollywood International Airport apart from the daily nonstop flights (once a day) from Tampa Bay International Airport to Havana.

The decision is in addition to the routes awarded by the DOT last month. Southwest Airlines intends to launch all flights to Cuba – two daily departures from Ft. Lauderdale (Miami Area) to Havana, two to Varadero and one to Santa Clara in addition to one daily departure from Tampa to Havana – later this year (assuming necessary approvals from the Cuban government).

Zacks Rank & Key Picks

Southwest Airlines carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include Cathay Pacific Airways Ltd. (OTC:CPCAY) , GOL Linhas Aereas Inteligentes S.A. (NYSE:GOL) and ANA Holdings Inc. (OTC:ALNPY) . GOL and Cathay Pacific sport a Zacks Rank #1 (Strong Buy) while ANA Holdings carries a Zacks Rank #2 (Buy).