The Southwest Airline Inc. (LUV) stock ended in green following the news of the company building a new facility at the William. P. Hobby international airport in Houston. The new facility will accommodate international flights to the Caribbean, Mexico and the northern part of Latin America.
The facility will be built entirely by Southwest for around $156 million and will have five gates. It is expected to further enhance international air service from the Houston airport. The project will also include expansion of its existing security checkpoint. Moreover, it is expected to generate more than 10,000 jobs across Houston, which will have positive impact on the economy.
The new facility is expected to be up and running from 2015 and will be accretive to both Southwest and the city of Houston. It is expected to bring in one million additional passengers per year to the Hobby international airport.
To support the anticipated increase in passenger footfall, the airport authority is making a significant investment of its own in addition to Southwest’s investments. The authority will build a separate multiple-level parking garage and enhance the existing road infrastructure.
A couple of months back, Southwest’s rival United Continental Holdings Inc. (UAL) unveiled its brand-new United Club lounge in Terminal 2 at San Diego International Airport.
Southwest reported disappointing August traffic due to a 2% annualized decline in RPM’s, while load factor also decreased 3.4% year over year. We believe the new facility is an effort by Southwest to improve its falling passenger count and strengthen its position in the fourth largest U.S. city.
Southwest, which operates along with other prominent passenger carriers such as Delta Airlines Inc. (DAL) and JetBlue Airways Corp. (JBLU) currently carries a Zacks Rank #3 (Hold). JetBlue and Delta also carry a Zacks Rank #3 (Hold).
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