Citi Has Buy on Southwest Airlines

Citi Investment Research is out with a research report on Southwest Airlines Co. LUV and it has a Buy rating and a $12 price target on shares. In a note to clients, Citi Investment Research writes, " Management remains committed to transforming LUV to achieve its 15% pretax ROIC target, which we do not expect to occur over the next 3 years. The company plans to hold capacity roughly flat to down in 2012 while competitors trim more domestically. Further, the company sees opportunity to transform AirTran's networks to generate unit revenues consistent with Southwest's, while holding net costs from the merger integration at flat to a benefit. In addition, the revamped frequent flyer program, affinity card, and further revenue optimization could add a few hundred million to the top line in the coming years. Lastly, the entire management team has turned its focus to the integration of AirTran to ensure successful execution, although this may delay slated technology initiatives." Shares of LUV gained 33 cents yesterday to close at $8.71, a gain of 3.94%.