How Did Southwest Perform Operationally In November?
After a disappointing third quarter, given a 3.4% y-o-y drop in revenues and a -5% decline in unit revenues, the company showcased some improvement in its October metric. Continuing with the uptrend, in November, the company was seen performing well in its key metrics. Keeping with its guidance of 5%-6% expansion in capacity in the year, Southwest’s available seat miles in the month of November 2016 were up 4.9%. Including this month, so far in the year capacity is up as much as 5.8%. The occupancy rate improved by 1.8 percentage points on an annual basis to 85.1%, but was up only 50 bps for the full year. In terms of passenger traffic, the growth was 7.2%. The carrier remains hopeful to turn its revenues around in January due to impressive bookings it has received for the month and reduced capacity in 2017. However, the recently ratified labor contract will increase the company’s operating costs by 3.5% in Q4’16. Consequently, we may see some adverse affect on the bottom line.
In terms of unit revenue, the company expects the decline to persist, with unit revenues down 4%-5% in the final quarter of the year, due to the timings of the Christmas holiday and regional price wars.
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Have more questions about Southwest Airlines (NYSE:LUV)? See the links below:
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- How Did Southwest Airlines Perform Operationally In September?
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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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