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Spirit’s November Traffic Fueled By Busy Thanksgiving Holiday Travel

Spirit Airlines’ (SAVE) growth continues to outpace competing airlines and with a 7% PE ratio discount compared to the industry average, the company has room to grow from a revenue and stock appreciation standpoint. This was evident again when the company, along with the other major airlines, recently reported November 2017 traffic results. While most major airlines experienced respectable growth due to busy Thanksgiving holiday travel, its very important to see Spirit continuing to post consistent growth with previous months. Spirit surpassed November 2016 growth of 15.5% and 16.4% for revenue passenger miles (RPMs) and available seat miles (ASMs) year over year.

Holiday traffic is more important as travelers value reliability when it comes to the holidays and this is an area Spirit has struggled in the past. I will discuss this is more detail, but November 2017 traffic data come in as follows:

Revenue passenger miles (RPMs) measures the traffic for an airline and is calculated by multiplying the number of revenue-paying passengers for the month by the total distance of flights for the month. Spirit Airlines RPMs increased 17.3% year over year to over 2.08 billion. Spirit wasnt the only airline to see increased traffic during November. In comparison to other airlines, United (NYSE:UAL) by far led the way with a 5.1% increase. Behind Uniteds stellar month was Delta Air Lines (NYSE:DAL) at 3.5% increase, Southwest (NYSE:LUV) with increases of 3.4%, and JetBlue (NASDAQ:JBLU) right behind with an increase of 3%.

Average seat miles (ASMs) measures the airlines’ flight carrying capacity and is calculated by multiplying the number of seats available for passengers during the month by the total distance of flights for the month. Spirit Airlines’ ASMs increased 17.1% year over year to over 2.55 billion. This was a much greater increase compared to other airlines with Uniteds 5.1% increase being the next largest jump at over 3 times less. JetBlue and Delta followed behind with increases of 4.3% and 2.9%, respectively. Lastly, Southwest fell well behind competitors with an increase of only 2.5%.

Based on these results for the month of November 2017, Spirit Airlines continues to show impressive growth in comparison to the other airlines. It shows that their unique and market disrupting business model is still effective with RPMs and ADMs metrics both in the high teens and well above competitors. The 17.3% gain in RPMs was more than 3 times the next largest growth posted in the industry by United. With RPMs and ASMs of only 2.08 billion and 2.55 billion, both of which are significantly below the other major airlines, there is a lot of growth to be achieved by the low-cost airline.

While Spirit has seen extraordinary growth throughout much of the year, its encouraging to see such strong traffic in November. AAA was projecting a 3.3% year-over-year increase of Americans traveling 50 or more miles over Thanksgiving to a total of nearly 51 million individuals. These projections ranked as the busiest Thanksgiving travel since 2005. Within that, there are certain economic trends that skew that travel toward airlines. Airlines received the largest growth of Thanksgiving travelers with a 5% increase largely due to the highest Thanksgiving gas prices since 2014. Given Spirits issue with reliability, I was encouraged to see them get such a large percentage of this volume growth. Generally, I would expect travelers to be willing to pay a higher ticket for a higher probability of reaching their destination, but Spirit has put a large effort into fixing this negative image. In early December, the company announced a second straight month of record-breaking on-time success rate with 90.4% of all network flights arriving on-time in the month of November. This has culminated into a 4% system-wide on-time performance improvement through the first 11 months of 2017.

Improving this metric and ultimately the companys public image is a key initiative for Spirit and it becomes all the more important around the holidays. Spirit must keep this going in December and the Christmas holiday when AAA expects a record-breaking 107 million Americans to travel for the holiday. 6.4 million of them will travel by air, which is a 4.1% increase from the prior year. Im encouraged that Spirit will see a large portion of this increase largely due to their ability to increase their on-time success rate and their success in taking advantage of Thanksgiving holiday travel. A strong December will get the company off to a positive start for 2018 where I expect this positive momentum to continue.

While there are certain factors that could impact this trend, a lot of uncertainties are more likely to impact international travel versus domestic travel where Spirit Airlines concentrates. Additionally, the ongoing open contract negotiations with their pilots must be closely monitored. The pilots are represented by the Air Line Pilots Association and the two parties have been in an over 2-year bitter contract negotiation. Data shows that Spirit pays their pilots about half of what the other large airlines are paying their pilots due to their low-cost business model. As was seen earlier in the year, the pilots have the ability to impact flights and cause pain to shareholders–this situation should be closely monitored, but given the federal court order win in May, Im hopeful that the worst is behind Spirit.

In order to take full advantage of this increase in passengers, Spirit must continue to offer cheaper fares while managing customer service issues and the associated bad publicity. With their unique business model, Spirit Airlines is able to offer fares, on average, 40% cheaper than other airlines, according to the Department of Transportation (DOT) in a recent study. Even after adding additional items, such as seat assignments, bags, and refreshments, the total fare is 35% lower according to the same DOT study. Because of the company’s unique business model, the company tends to not spend on investments such as large dollar advertising campaigns, multiple-class cabins, and other technologies such as satellites and wireless internet equipment. Concentrating on operational efficiency allows the company to offer the lowest possible fares while still achieving higher profit margins than any other U.S. airline.

From a financial statement perspective, the company last reported third-quarter 2017 results. The company translated increased traffic into more revenue at a growth rate of 10.6% to $687 million. Despite the revenue growth, costs continued to climb at a slightly higher rate of 20% to $583 million. The increase in costs was attributed to flight volume, passenger re-accommodation expense, and higher fuel rates. The higher re-accommodation expenses were largely due to hurricane season. Again, this is something all airlines are dealing with and it isnt changing customer sentiment. From a valuation standpoint, Spirit Airlines stock looks cheap at a PE ratio of 14.3 compared to an industry average of 15.3 meaning the stock has nearly 7% to grow until it reaches the industry average.

With any rapid growth plan, there are some risks investing in Spirit Airlines; however, I believe the potential reward outweighs the risk. The above-industry average November 2017 and Q3 results compared to the other major airlines shows that their unique business model is continuing to be successful with airline customers even during the busy and time-sensitive holiday travel season. Given this success and low valuation, I believe the company is in a great position to take advantage of the expected increase in airline passengers as a result of the improving US economy and lower fuel prices. I fully expect the rapid growth story to continue through the remainder of 2017 and into 2018.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SAVE over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, Long Ideas, Services, Air Services, OtherWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Spirit’s November Traffic Fueled By Busy Thanksgiving Holiday Travel

Spirit Airlines’ (SAVE) growth continues to outpace competing airlines and with a 7% PE ratio discount compared to the industry average, the company has room to grow from a revenue and stock appreciation standpoint. This was evident again when the company, along with the other major airlines, recently reported November 2017 traffic results. While most major airlines experienced respectable growth due to busy Thanksgiving holiday travel, its very important to see Spirit continuing to post consistent growth with previous months. Spirit surpassed November 2016 growth of 15.5% and 16.4% for revenue passenger miles (RPMs) and available seat miles (ASMs) year over year.

Holiday traffic is more important as travelers value reliability when it comes to the holidays and this is an area Spirit has struggled in the past. I will discuss this is more detail, but November 2017 traffic data come in as follows:

Revenue passenger miles (RPMs) measures the traffic for an airline and is calculated by multiplying the number of revenue-paying passengers for the month by the total distance of flights for the month. Spirit Airlines RPMs increased 17.3% year over year to over 2.08 billion. Spirit wasnt the only airline to see increased traffic during November. In comparison to other airlines, United (NYSE:UAL) by far led the way with a 5.1% increase. Behind Uniteds stellar month was Delta Air Lines (NYSE:DAL) at 3.5% increase, Southwest (NYSE:LUV) with increases of 3.4%, and JetBlue (NASDAQ:JBLU) right behind with an increase of 3%.

Average seat miles (ASMs) measures the airlines’ flight carrying capacity and is calculated by multiplying the number of seats available for passengers during the month by the total distance of flights for the month. Spirit Airlines’ ASMs increased 17.1% year over year to over 2.55 billion. This was a much greater increase compared to other airlines with Uniteds 5.1% increase being the next largest jump at over 3 times less. JetBlue and Delta followed behind with increases of 4.3% and 2.9%, respectively. Lastly, Southwest fell well behind competitors with an increase of only 2.5%.

Based on these results for the month of November 2017, Spirit Airlines continues to show impressive growth in comparison to the other airlines. It shows that their unique and market disrupting business model is still effective with RPMs and ADMs metrics both in the high teens and well above competitors. The 17.3% gain in RPMs was more than 3 times the next largest growth posted in the industry by United. With RPMs and ASMs of only 2.08 billion and 2.55 billion, both of which are significantly below the other major airlines, there is a lot of growth to be achieved by the low-cost airline.

While Spirit has seen extraordinary growth throughout much of the year, its encouraging to see such strong traffic in November. AAA was projecting a 3.3% year-over-year increase of Americans traveling 50 or more miles over Thanksgiving to a total of nearly 51 million individuals. These projections ranked as the busiest Thanksgiving travel since 2005. Within that, there are certain economic trends that skew that travel toward airlines. Airlines received the largest growth of Thanksgiving travelers with a 5% increase largely due to the highest Thanksgiving gas prices since 2014. Given Spirits issue with reliability, I was encouraged to see them get such a large percentage of this volume growth. Generally, I would expect travelers to be willing to pay a higher ticket for a higher probability of reaching their destination, but Spirit has put a large effort into fixing this negative image. In early December, the company announced a second straight month of record-breaking on-time success rate with 90.4% of all network flights arriving on-time in the month of November. This has culminated into a 4% system-wide on-time performance improvement through the first 11 months of 2017.

Improving this metric and ultimately the companys public image is a key initiative for Spirit and it becomes all the more important around the holidays. Spirit must keep this going in December and the Christmas holiday when AAA expects a record-breaking 107 million Americans to travel for the holiday. 6.4 million of them will travel by air, which is a 4.1% increase from the prior year. Im encouraged that Spirit will see a large portion of this increase largely due to their ability to increase their on-time success rate and their success in taking advantage of Thanksgiving holiday travel. A strong December will get the company off to a positive start for 2018 where I expect this positive momentum to continue.

While there are certain factors that could impact this trend, a lot of uncertainties are more likely to impact international travel versus domestic travel where Spirit Airlines concentrates. Additionally, the ongoing open contract negotiations with their pilots must be closely monitored. The pilots are represented by the Air Line Pilots Association and the two parties have been in an over 2-year bitter contract negotiation. Data shows that Spirit pays their pilots about half of what the other large airlines are paying their pilots due to their low-cost business model. As was seen earlier in the year, the pilots have the ability to impact flights and cause pain to shareholders–this situation should be closely monitored, but given the federal court order win in May, Im hopeful that the worst is behind Spirit.

In order to take full advantage of this increase in passengers, Spirit must continue to offer cheaper fares while managing customer service issues and the associated bad publicity. With their unique business model, Spirit Airlines is able to offer fares, on average, 40% cheaper than other airlines, according to the Department of Transportation (DOT) in a recent study. Even after adding additional items, such as seat assignments, bags, and refreshments, the total fare is 35% lower according to the same DOT study. Because of the company’s unique business model, the company tends to not spend on investments such as large dollar advertising campaigns, multiple-class cabins, and other technologies such as satellites and wireless internet equipment. Concentrating on operational efficiency allows the company to offer the lowest possible fares while still achieving higher profit margins than any other U.S. airline.

From a financial statement perspective, the company last reported third-quarter 2017 results. The company translated increased traffic into more revenue at a growth rate of 10.6% to $687 million. Despite the revenue growth, costs continued to climb at a slightly higher rate of 20% to $583 million. The increase in costs was attributed to flight volume, passenger re-accommodation expense, and higher fuel rates. The higher re-accommodation expenses were largely due to hurricane season. Again, this is something all airlines are dealing with and it isnt changing customer sentiment. From a valuation standpoint, Spirit Airlines stock looks cheap at a PE ratio of 14.3 compared to an industry average of 15.3 meaning the stock has nearly 7% to grow until it reaches the industry average.

With any rapid growth plan, there are some risks investing in Spirit Airlines; however, I believe the potential reward outweighs the risk. The above-industry average November 2017 and Q3 results compared to the other major airlines shows that their unique business model is continuing to be successful with airline customers even during the busy and time-sensitive holiday travel season. Given this success and low valuation, I believe the company is in a great position to take advantage of the expected increase in airline passengers as a result of the improving US economy and lower fuel prices. I fully expect the rapid growth story to continue through the remainder of 2017 and into 2018.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SAVE over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:ExpandAuthor payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500.Tagged: Investing Ideas, Long Ideas, Services, Air Services, OtherWant to share your opinion on this article? Add a comment.Disagree with this article? Submit your own.To report a factual error in this article, click here

Boeing Wins Administration Support in Bombardier Trade Case

That didn’t take long. On Wednesday the U.S. Department of Commerce (DOC) recommended the imposition of a 300% duty on all Bombardier passenger jets imported into the United States from Canada.

The recommendation follows Tuesday’s hearing before the U.S. International Trade Commission (ITC) where Bombardier and Boeing Co. (NYSE: BA), along with other interested parties, weighed in on the dispute that revolves around the sale of 75 Bombardier CS-100 passenger jets to Delta Air Lines Co. (NYSE: DAL) in April 2016.

Boeing, which lost the bidding, filed a complaint with the ITC alleging Bombardier dumped the planes on the U.S. market at below cost and that the federal government should impose a countervailing duty of around 80% on planes imported into the country. Just to make the point more clearly, the DOC later recommended a charge equal to 219% of the sale price of the Bombardier planes for accepting unfair subsidies from the Canadian government. The 300% in duties will be imposed on each imported or “partially assembled” aircraft.

Wednesday’s decision precedes a decision expected by next week from the ITC on whether Boeing was “harmed” by the sale of Bombardier planes to Delta. Virtually everyone agrees that the ITC will come down on Boeing’s side.

Bombardier and Airbus, which now owns the C-Series project, have said they will add a final assembly line to the Airbus facility in Mobile, Alabama, to complete final assembly of the C-Series planes. Boeing called the proposed assembly line a feint and said that even if it were to be built Bombardier should pay a tariff for circumventing U.S. regulations.

In the fact sheet issued with Wednesday’s announcement, the DOC noted that the recommended duties apply to all planes “whether they enter the United States fully or partially assembled.” The fate of the Bombardier-Airbus plan turns on the definition of a “partially assembled” plane, but if the Airbus assembly line in Alabama lets the company avoid U.S. duties, a similar line with similar partially assembled planes should also work for Bombardier. Or at least the company could make that argument.

If, as nearly everyone believes, Boeing prevails, Bombardier has promised to appeal, although where that appeal may be lodged is so far unspecified. A complaint to the World Trade Organization (WTO) or through the North American Free Trade Agreement (NAFTA) appear to be likely candidates.

The DOC has posted both its recommendation and a fact sheet on the issue at its website.

24/7 Wall St.
Canada Retaliates Against Boeing Over Trade Case — UPDATED

Southwest Airlines Co Stock Poised to Gain New Heights

Southwest Airlines Co (NYSE:LUV) has mastered one task that’s unusual for an airline carrier — sustained profitability. The Dallas-based company again beat expectations in its latest earnings report. LUV stock is on track to report its 45th consecutive year of profitability.

Southwest Airlines Co (LUV) Stock Poised to Gain New Heightsinvestorplace.com/wp-content/uploads/2016/08/luvmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/08/luvmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/08/luvmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/08/luvmsn-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/08/luvmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/08/luvmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2016/08/luvmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2016/08/luvmsn-170×93.jpg 170w, investorplace.com/wp-content/uploads/2016/08/luvmsn.jpg 728w” sizes=”(max-width: 300px) 100vw, 300px” /> Source: Jerry Landers via Flickr (Modified)

However, revenue troubles have plagued the airline this year and it also has underperformed upstart carriers JetBlue Airways Corporation (NASDAQ:JBLU) and Spirit Airlines Incorporated (NASDAQ:SAVE) in some respects. Still, its business model should keep LUV on track for sustained revenue, profit, and traffic growth.

LUV Stock Remains the Most Solid in the Industry

LUV stock’s consistent record of profits makes it unique among its peers. In an industry where legacy carriers such as American Airlines Group Inc (NASDAQ:AAL), Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL) have struggled with highly-publicized passenger complaints and periodic bankruptcies, Southwest stands out as a solid performer.

With rare exceptions, Southwest has almost always reported quarterly profits since soon after its founding 46 years ago. Its costs remain low, and it provides customer satisfaction in many areas where legacy carriers have not. Southwest is one of the few airlines that allows flight changes without fees. It also avoided the trend of charging for checked bags.

Growth Has Been Slowed by Expected and Unexpected Costs

The LUV stock price has experienced a mediocre year after the company reported revenue would grow 1-2% this year. This figure stands well below 5-year average revenue growth of over 5.4%. This also places the company’s revenue growth below that of JetBlue and Spirit. Like all airlines, LUV struggled as an unusually active hurricane season disrupted flight schedules.

Also, LUV has started retiring 737-300 aircraft in favor of the 737 MAX 8. The move will give Southwest more fuel-efficient, longer-range aircraft, while still maintaining the simplicity of operating only Boeing 737 aircraft. Exclusive reliance on 737s has made aircraft maintenance simpler and less costly — a trend that will continue.

This move will also add to costs in the near term. The company carries about $3.3 billion in combined long- and short-term debt. However, with a $32 billion market cap, financing these more efficient planes should not cause issues. Moreover, lower fuel costs will help the bottom line. Longer ranges also make more direct flight routes possible.

LUV Stock Should Continue Rising

Paying for the new planes has also been helped by the growth of LUV stock. Equity moved steadily downward from 2000 to 2012, but, since then, the LUV stock price has risen from below $9 per share to as high as $64 per share. With the recent revenue struggles, the stock has fallen into the mid-$50 per share range. However, it maintains a price-earnings ratio of just under 16. While that’s high compared to industry peers, it remains below S&P 500 averages.

A likely catalyst in LUV’s bull run has been dividend increases. After years of paying a negligible dividend, the company began annual dividend increases in 2012. The dividend now stands at 50 cents per share with a yield just over 0.75% — below the S&P 500 average, but much better than before.

Next Page

Given this, now might be a good time to buy. In addition to the low PE, the worst hurricane season in 12 years has ended and abnormally high levels of snow have not manifested this winter. Hence, weather-related disruptions should return to normal levels.

LUV will also tap a new growth market. Southwest announced it will start flying to Hawaii in 2018. This will bring the airline into one of the few domestic markets it doesn’t currently serve. In future years, this should open Southwest to the lucrative island-hopping market, where it can carry passengers across the state.

Concluding Thoughts

Despite service issues and the cost of upgrading its fleet, the trend in LUV stock of steady, consistent profit growth appears poised to continue. While its new fleet will be costly, LUV remains financially strong enough to carry the debt burden. Also, entering the Hawaii market will bring new growth, as well as opening markets in the future to other parts of the state.

Most of these moves mean added cost in the near term, but they should improve the bottom line in future years. Investors who want steady growth and consistent profits should onboard LUV stock and enjoy a long ride at cruising altitude.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.

 

Southwest Airlines Co Stock Poised to Gain New Heights

Southwest Airlines Co (NYSE:LUV) has mastered one task that’s unusual for an airline carrier — sustained profitability. The Dallas-based company again beat expectations in its latest earnings report. LUV stock is on track to report its 45th consecutive year of profitability.

Southwest Airlines Co (LUV) Stock Poised to Gain New Heightsinvestorplace.com/wp-content/uploads/2016/08/luvmsn-55×30.jpg 55w, investorplace.com/wp-content/uploads/2016/08/luvmsn-200×110.jpg 200w, investorplace.com/wp-content/uploads/2016/08/luvmsn-162×88.jpg 162w, investorplace.com/wp-content/uploads/2016/08/luvmsn-65×36.jpg 65w, investorplace.com/wp-content/uploads/2016/08/luvmsn-100×55.jpg 100w, investorplace.com/wp-content/uploads/2016/08/luvmsn-91×50.jpg 91w, investorplace.com/wp-content/uploads/2016/08/luvmsn-78×43.jpg 78w, investorplace.com/wp-content/uploads/2016/08/luvmsn-170×93.jpg 170w, investorplace.com/wp-content/uploads/2016/08/luvmsn.jpg 728w” sizes=”(max-width: 300px) 100vw, 300px” /> Source: Jerry Landers via Flickr (Modified)

However, revenue troubles have plagued the airline this year and it also has underperformed upstart carriers JetBlue Airways Corporation (NASDAQ:JBLU) and Spirit Airlines Incorporated (NASDAQ:SAVE) in some respects. Still, its business model should keep LUV on track for sustained revenue, profit, and traffic growth.

LUV Stock Remains the Most Solid in the Industry

LUV stock’s consistent record of profits makes it unique among its peers. In an industry where legacy carriers such as American Airlines Group Inc (NASDAQ:AAL), Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL) have struggled with highly-publicized passenger complaints and periodic bankruptcies, Southwest stands out as a solid performer.

With rare exceptions, Southwest has almost always reported quarterly profits since soon after its founding 46 years ago. Its costs remain low, and it provides customer satisfaction in many areas where legacy carriers have not. Southwest is one of the few airlines that allows flight changes without fees. It also avoided the trend of charging for checked bags.

Growth Has Been Slowed by Expected and Unexpected Costs

The LUV stock price has experienced a mediocre year after the company reported revenue would grow 1-2% this year. This figure stands well below 5-year average revenue growth of over 5.4%. This also places the company’s revenue growth below that of JetBlue and Spirit. Like all airlines, LUV struggled as an unusually active hurricane season disrupted flight schedules.

Also, LUV has started retiring 737-300 aircraft in favor of the 737 MAX 8. The move will give Southwest more fuel-efficient, longer-range aircraft, while still maintaining the simplicity of operating only Boeing 737 aircraft. Exclusive reliance on 737s has made aircraft maintenance simpler and less costly — a trend that will continue.

This move will also add to costs in the near term. The company carries about $3.3 billion in combined long- and short-term debt. However, with a $32 billion market cap, financing these more efficient planes should not cause issues. Moreover, lower fuel costs will help the bottom line. Longer ranges also make more direct flight routes possible.

LUV Stock Should Continue Rising

Paying for the new planes has also been helped by the growth of LUV stock. Equity moved steadily downward from 2000 to 2012, but, since then, the LUV stock price has risen from below $9 per share to as high as $64 per share. With the recent revenue struggles, the stock has fallen into the mid-$50 per share range. However, it maintains a price-earnings ratio of just under 16. While that’s high compared to industry peers, it remains below S&P 500 averages.

A likely catalyst in LUV’s bull run has been dividend increases. After years of paying a negligible dividend, the company began annual dividend increases in 2012. The dividend now stands at 50 cents per share with a yield just over 0.75% — below the S&P 500 average, but much better than before.

Next Page

Given this, now might be a good time to buy. In addition to the low PE, the worst hurricane season in 12 years has ended and abnormally high levels of snow have not manifested this winter. Hence, weather-related disruptions should return to normal levels.

LUV will also tap a new growth market. Southwest announced it will start flying to Hawaii in 2018. This will bring the airline into one of the few domestic markets it doesn’t currently serve. In future years, this should open Southwest to the lucrative island-hopping market, where it can carry passengers across the state.

Concluding Thoughts

Despite service issues and the cost of upgrading its fleet, the trend in LUV stock of steady, consistent profit growth appears poised to continue. While its new fleet will be costly, LUV remains financially strong enough to carry the debt burden. Also, entering the Hawaii market will bring new growth, as well as opening markets in the future to other parts of the state.

Most of these moves mean added cost in the near term, but they should improve the bottom line in future years. Investors who want steady growth and consistent profits should onboard LUV stock and enjoy a long ride at cruising altitude.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.