Southwest Airline Shares Continue Yesterday’s Flight Higher on New Strategy

Southwest Airlines (NYSE:LUV) announced it will not use the excess capacity it obtained from acquiring Air Tran because the economy is still too weak. Shares are up 1.97% to $8.47.

The news comes after airline executives at both United Continental (NYSE:UAL) and Southwest Airlines said they expected to keep seat capacity flat in 2012, allowing them to increase ticket prices while filling flights. “Our bookings looks good for the rest of the month and we’re currently anticipating that our third-quarter [unit revenue] combined will be up in the low to mid single-digit range from the third quarter of 2010,” said Southwest Chief Financial Officer Laura Wright.

The company sports a P/E ratio of about 13 which is in line with its industry. The company also trades at a sales multiple of 0.5 which is much higher than its industry rivals. On the technical front shares trade well below their declining 50 and 200 day moving averages. The MACD is bullish while RSI is pointing up at 47.

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