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Southwest Warns RASM Could Drop This Quarter; Airline Stocks Are Falling

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Southwest Warns RASM Could Drop This Quarter; Airline Stocks Are Falling
  • Shares of Southwest Airlines Co (NYSE: LUV) plunged more than 7 percent on Tuesday after the company reported a 13.9 percent year-over-year increase in revenue passenger miles in November.
  • However, the company cautioned that its fourth quarter 2015 operating revenue per available seat mile (RASM) will be approximately flat to down 1.0 percent year-over-year.
  • Southwest's guidance created a ripple effect across the airline sector as other major airliners saw large declines in their stock.

Southwest Airlines released its November traffic data and provided fourth quarter guidance.

Southwest said that it flew 9.7 billion revenue passenger miles (RPMs) throughout November, marking a 13.9 percent increase from the same month a year ago. The company added that its available seat miles (ASMs) rose 9.7 percent from a year ago to 11.7 billion.

Southwest also disclosed that its November 2015 load factor was a record for the month of November at 83.2 percent.

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However, the company said in its press release that based on the results and current trends, its fourth quarter 2015 operating revenue per ASM (RASM) will be approximately flat to down 1.0 percent compared to the same quarter a year ago.

By 10:30 a.m. ET, shares of Southwest was lower by nearly 8 percent at $45.57. At the same time, shares of SPDR S&P 500 ETF Trust (NYSE: SPY) were lower by just under 0.8 percent.

Southwest's guidance caused shares of other airliners to fall in sympathy. Delta Air Lines, Inc. (NYSE: DAL)'s stock lost more than 2 percent, United Continental Holdings Inc (NYSE: UAL)'s stock was lower by more than 3 percent, and United Continental Holdings Inc (NYSE: UAL)'s stock was lower by nearly 3 percent.

 

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