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Southwest Flying High

August 25, 2013 | About:

Southwest Airlines is a major passenger airline that provides scheduled air transportation in the United States and international markets. Southwest commenced service on June 18, 1971, with three Boeing 737 aircraft serving three Texas cities: Dallas, Houston and San Antonio. Today the company serves 97 destinations in 41 states, the District of Columbia, the Commonwealth of Puerto Rico and six near-international countries including Mexico (Cancun, Mexico City, and Cabo San Lucas), Jamaica (Montego Bay), The Bahamas (Nassau), Aruba (Oranjestad), Dominican Republic (Punta Cana) and Bermuda. At Dec. 31, 2012, the total fleet operated by Southwest and AirTran combined consisted of 694 aircraft, including 606 Boeing 737s and 88 Boeing 717s.


Revenues have grown strongly and, earning $421 million in net income in 2012, the company was profitable for the 40th consecutive year. Second quarter 2013 net income was $224 million, or $.31 per diluted share, which included $50 million of unfavorable special items. Excluding special items, second quarter 2013 net income was a record $274 million, or $.38 per diluted share. This performance benefited from all-time high operating revenues, lower fuel prices and strong load factors.

The company said it remains on track with its plan to fully integrate AirTran into Southwest Airlines by the end of 2014. Connecting the Southwest and AirTran networks is a key milestone. As of April 14th, customers can now fly across South West and AirTran’s combined 97 destinations on a single itinerary. The company’s ability to optimize the combined networks and operations is enhanced significantly with connecting capabilities as it continues to transition AirTran markets to the Southwest network.


Consensus earnings forecasts on Yahoo Finance are bullish and point to earnings growth averaging 33.45% over the next five years. Investors who are confident the company will meet these expectations may well be tempted by the current earnings multiple of 26.44.

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Risk Disclaimer: This article does not constitute a recommendation to buy or sell. Investing in stocks or other securities and derivatives is a high risk activity and not suitable for everyone. It is strongly recommended that individuals should consult with a SEC registered investment advisor prior to making any investment decisions.

Disclosure: The author holds no positions in the above mentioned stocks

Rating: 3.4/5 (5 votes)


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