In 'LUV' with Southwest
Andrew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There are few companies of comparable size to Southwest Airlines (NYSE: LUV) that have had such a big 2011. Southwest has made major competitive and strategic moves that it appears their quest for aerial dominance cannot be stopped.
Early this year, Southwest acquired the Orlando, FL based Airtran Airways. This acquisition is the perfect marriage of two low-cost, customer-focused airlines that operate in different regions of the United States, with little route overlap. In fact, Southwest expects that the completion of this merger will significantly expand their presence in several major markets such as Washington D.C. and New York.
The latest piece of news illustrates Southwest’s desire to further capitalize on their goal of being the United States' airline of choice. On Tuesday Southwest announced a deal with Boeing (NYSE: BA) for the order of 208 Boeing 737, for a deal valued at $18 billion. This deal represents a huge strategic advantage for Southwest as they prepare to integrate or replace their existing fleet with the new fuel efficient airliner.
What does this mean for investors? Much like their airfare, Southwest offers a cheap stock with potential upside. Since 1976 Southwest has paid a dividend every quarter to its shareholders. Combined with a stock that is trading almost 40% down from its 52-week high, and 38 years of consecutive profitability, Southwest provides a stock that is worth owning. Once the acquisition of Airtran is fully integrated in early 2012, I look for a healthy stock, and an even healthier business.
Andrew Dillard does not own stock in LUV or BA.