Southwest Airlines' Load Factor in May Falls, Stock Slumps

Low-cost carrier Southwest Airlines Co.'s LUV shares have declined over 1.5%, following the disclosure of traffic results for May. The company recorded a 3.4% year-over-year improvement in revenue passenger miles or RPMs (a measure of air traffic) to 11.2 billion. Available seat miles or ASMs (a measure of capacity) expanded 4.0% to 13.2 billion.

Another important metric – load factor (percentage of seats filled by passengers) – deteriorated 40 basis points (bps) to 85.4% during the month as capacity expansion outpaced traffic growth, thus leading to relatively empty planes. For first five months of 2017, Southwest Airlines reported a 4.4% rise in RPMs to 51.8 billion and a 4.8% increase in ASMs to 63.2 billion. Load factor for the period contracted 30 bps to 81.9%.

Dallas-based company's decline in load factor is believed to disappoint investors. This seems to be the prime reason for stock's depreciation. The low-cost carrier still expects second-quarter 2017 operating revenue per ASM (RASM) to increase in the range 1%-2%, on a year-over-year basis.

Southwest Airlines Company Price

 

Southwest Airlines Company Price | Southwest Airlines Company Quote

Zacks Rank & Key Picks

Southwest Airlines currently carries a Zacks Rank #2 (Buy). Investors interested in the airline space may also consider Air France-KLM SA AFLYY, Deutsche Lufthansa AG DLAKY and Hawaiian Holdings, Inc. HA. All sport 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, Deutsche Lufthansa and Hawaiian Holdings gained over 58%, 37% and 16% over a period of three months.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>