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Southwest Airlines records strong financial results as its official de-hubbing of Atlanta closes

Analysis

Similar to US carriers Delta and US Airways, Southwest Airlines recorded a strong financial performance in 3Q2013, driven partly by its ability to raise fares as well as some relief in unit cost pressure. The carrier remains optimistic about 4Q2013 even as it faces some headwinds stemming from the US Government shutdown and the sliding of busy travel days for the US Thanksgiving holiday from Nov-2013 to Dec-2013.

Southwest reaches a milestone in Nov-2013 when its de-hubbing of Atlanta takes full effect. By Apr-2014 Southwest and AirTran will deploy 160 daily flights from the largest US airport in terms of passenger enplanements. At that time Atlanta will be roughly the same size in terms of departures as Houston Hobby or Phoenix - two of Southwest's top markets. But it will pale in comparison to Chicago Midway, which currently has roughly 253 daily departures.

Southwest's management has concluded that Atlanta was a "challenge" for AirTran prior to the carrier's acquisition by Southwest and the de-hubbing should produce improvements in bolstering traffic in the local market from the airport. Carrier executives are also stressing the company's shrinking footprint in Atlanta should not be interpreted as the airport's value diminishing in the combined Southwest-AirTran network.

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