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Southwest Airlines’ September Traffic, Load Factor Fall


Southwest Airlines Co. LUV reported disappointing traffic numbers for September. Revenue Passenger Miles (RPMs) — a measure of air traffic — declined 4.5% year over year to 9.5 billion in the month. Meanwhile Available Seat Miles (ASMs) —a measure of capacity—decreased 1.6% to 11.61 billion. Load factor (the percentage of seats filled by passengers) decreased 250 basis points (bps) to 81.7% in September. The key metric fell since the contraction in traffic was more than that in capacity leading to empty planes.

On a year-to-date basis, Southwest Airlines witnessed a 3.7% rise in RPMs to 96.85 billion. Also, ASMs grew 4.1% to 115.92 billion. As a result, the load factor decreased 40 bps to 83.5%. Additionally, passenger count in the first nine months of 2017 rose 3.8% to 117.25 billion.

The company’s third-quarter results, scheduled to be revealed on Oct 26, are expected to be hurt due to the recent hurricanes (Harvey, Irma and Maria) and the earthquake in Mexico. These natural disasters have forced the airline to cancel approximately 5,000 flights.

As a result, operating revenues are likely to be hurt to the tune of $100 million. Moreover, this Dallas-based carrier expects third-quarter operating revenue per available seat mile (RASM) to be flat to down 1% year over year.

It is not only Southwest Airlines whose third-quarter results are likely to be impacted by the natural calamities. Results of other carriers like United Continental Holdings UAL and American Airlines Group AAL are also likely to be hurt by the events.

Zacks Rank & Stock to Consider

Southwest Airlines carries a Zacks Rank #5 (Strong Sell). A better-ranked stock in airline space is GOL Linhas AéreasInteligentes S.A. GOL carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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