NEW YORK (TheStreet) -- Shares of Southwest Airlines (LUV) - Get Report are falling 9.09% to $38.19 on heavy trading volume Thursday morning after reporting lower-than-expected 2016 second quarter earnings and revenue before the opening bell. 

The Dallas-based airline reported a "very bad" decline in revenue per available passenger, while increasing capacity between 5% and 6% this year, TheStreet's Jim Cramer pointed out on CNBC's "Squawk on the Street" this morning.

"That is not good news," he noted. "That's going to send the whole airline group down - a key group in this rally."

Shares of American Airlines (AAL) and Delta Air Lines (DAL) recently advanced on the belief that the industry strengthened this past month, but Cramer said in the above video he "did not feel any confidence" after he saw what Southwest CEO Gary Kelly said.

The primary problem in the quarter was a decline in fares, Cramer added this morning, mentioning that price wars are back. 

Overcapacity is another issue affecting the airline industry as a whole, which could be a read-through for Boeing (BA) as well, Cramer stated. 

As a domestic airline, Southwest can't really blame external factors such as global terrorism for its woes. 

"This is having people reevaluate and re-rate the group on the fly," Cramer said. "And it's getting a negative re-rating."

Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B+.

Southwest Airlines' strengths such as its revenue growth, impressive record of earnings per share growth, increase in net income, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

You can view the full analysis from the report here: LUV

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author. 

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