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Airline Stocks Rally On Southwest Airlines' CEO Comments

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Airline Stocks Rally On Southwest Airlines' CEO Comments

Airline stocks rallied Monday after Southwest Airlines Co (NYSE: LUV) told Bloomberg it will scale back 2015 capacity growth and boost its goal for return on invested capital.

Southwest aims to increase its capacity 7 percent this year, rather than the 8 percent goal it previously forecast, Chief Executive Gary C. Kelly told Bloomberg in an interview.

Kelly also told Bloomberg that the company's historic pretax goal of 15 percent a year is too low, and that a new target may be announced next month.

Southwest shares had fallen sharply after Chief Financial Officer Tammy Romo said last month that the company would expand its capacity to between 7 percent and 8 percent, from a previous goal of 7 percent.

"We're talking about rounding that got us to the 7 percent to 8 percent," Kelly told Bloomberg on Monday.

"In this particular case, we're going to make sure we manage accordingly to the low end of the range," Kelly said. "That should address some of the concerns of our investors."

Southwest gained 3 percent recently, changing hands at $38.09.

American Airlines Group Inc (NASDAQ: AAL) and United Continental Holdings Inc (NYSE: UAL) each gained more than 4 percent, with Delta Air Lines, Inc. (NYSE: DAL) up nearly as much.

Nearly all other major carriers were up by lesser amounts.

The NYSE ARCA Airline Index (NYSE: XAL) is off about 6.6 percent during the past month, but gained about 1.5 percent recently.

 

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