Southwest Airlines to Expand Operations - Analyst Blog

Leading U.S. passenger carrier Southwest Airlines Co. LUV announced its plans to extend its international destinations besides adding some new non-stop flights from Dallas Love Field, where flight limitations will finally be lifted in Oct 2014.   

Southwest Airlines will add flights to Mexico City from San Antonio, Texas and Santa Ana, CA, while flights to Punta Cana will be connected with Atlanta and Washington D.C. from Nov 2, 2014. Southwest Airlines will replace AirTran service in these destinations, bringing its total number of destinations to 90 in five different countries across North America and the Caribbean. Notably, AirTran will be fully integrated with Southwest Airlines by the end of this year.  

In Feb 2014, Southwest Airlines planned to start operating non-stop flights from Dallas to Baltimore, Las Vegas, Denver, Orlando and Florida from Oct 13. Effective from the same date, the carrier will also extend its reach to Chicago and Reagan National Airport DCA. Starting Nov 2, non-stop services from Dallas will be extended to some more cities, which include popular destinations like Atlanta, New York, Los Angeles and Tampa Bay, among others.

Back in 1979, flight restrictions were imposed on Dallas Love Field under the Wright Amendment– a federal law aimed at supporting the city's other airport – Fort Worth International Airport.

Southwest Airlines has also announced its plans to extend operations from DCA, where the carrier recently won bids for 27 pairs of slots as part of the mega merger that led to the formation of American Airlines Group Inc. AAL. The carrier has decided to extend daily departures from DCA to 44 from the current 17, thus increasing its services from the airport by more than 3 times.

Further, from Nov 2, the passenger carrier plans to start daily non-stop flights to Arkon-Canton and Indianapolis from DCA and to Las Vegas and San Diego from Washington Dulles International Airport.

We believe such extension of operations by Southwest Airlines will bring down the average fares of flights from these two busy airports, namely Dallas Love Field and DCA, to other U.S. cities, while the international expansion will offer diversification benefits to the carrier.

Southwest Airlines currently carries a Zacks Rank #1 (Strong Buy). Some other stocks worth considering within this sector are Alaska Air Group Inc. ALK and Delta Airlines Inc. DAL, both of which carry a Zacks Rank #1 (Strong Buy).

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