How Did Southwest Perform Operationally In December?
After a disappointing third quarter, given a -3.4% y-o-y drop in revenues and a -5% decline in unit revenues, Southwest showcased some improvement in its October and November metric. Keeping with the uptrend, the company demonstrated strength in its key metrics in December. It grew its capacity by 4.8% y-o-y in December, one of the highest in the industry. Consequently, the full year capacity is up as much as 5.8%, in line with the company guidance of 5%-6% full year capacity growth. Although the occupancy rate improved slightly (+40 bps) for the full year 2016, it deteriorated for the month of December (-40 bps). In terms of passenger traffic, the growth was 4.2% in December and 6.2% for the full year.
In terms of unit revenue, the company expects the decline to persist, but at a lower rate than previously expected. Southwest has revised its unit revenues guidance for Q4’16 from a decline of 4%-5% to a decline of 3%-4%, attributable to the improvement seen in close in yields around holidays. However, the decline continues to be higher than that seen by legacy carriers, Delta and United, likely due to the lack of capacity restriction by Southwest.
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Have more questions about Southwest Airlines (NYSE:LUV)? See the links below:
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Southwest Airlines
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