Alaska Air Group, Inc. (NYSE:ALK) has had an outstanding performance this year. The stock has rallied 53% YTD, while the S&P 500 has improved 14%. The airline has also outpaced major airlines such as Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL). Although several investors do not agree with the idea that Alaska Air Group is a good investment, I would like to discuss two press releases that point out the company’s near term growth. For these reasons, a long position may be considered in Alaska Air Group, Inc. (NYSE:ALK).
Fundamental Analysis
Alaska Air Group, Inc. (NYSE:ALK) is trading with a P/E of 15.21 and a forward P/E of 10.19. Its price-to-earnings-to-growth is 1.04. Its balance sheet carries a small amount of debt, with a debt ratio of 0.65, and the company held $1.3 billion in cash as of the end of the last quarter. Further, its return-on-equity of 23% is the highest in the industry. Its solid business model allows the company to operate with a profit margin of 6%. Overall, the stock has doubled in the past 12 months, and I believe it still has room to the upside.
Delta Air Lines, Inc. (NYSE:DAL) is trading with a P/E of 17.77, and a forward P/E of 6.14. Its price-to-earnings-to-growth is 0.66, and the company is operating with a 2.43% profit margin. United Continental Holdings Inc (NYSE:UAL) is trading with a negative P/E and a forward P/E of 6.64. However, its profit margin is -1.86%. Although from a valuation point of view these major carriers could be considered for long positions, their most recent monthly traffic report may indicate a troublesome future.
April Monthly traffic report
The most important press release from Alaska Air Group, Inc. (NYSE:ALK) after the quarterly earnings report was the revised monthly traffic for April. The company reported an outstanding 9.2% increase in traffic on a 9.9 increase in capacity compared to April 2012. The revenue passenger mile (RPM) increased from $1.98 billion in April 2012 to $2.16 billion in April 2013. The available seat miles (ASM) increased from 2.27 billion to $2.49 billion for the same period.
On a year-to-date basis, Alaska Air Group, Inc. (NYSE:ALK) has increased the RPM by 9.4% from $7.62 billion in 2012 to $8.34 billion in 2013.
However, Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings Inc (NYSE:UAL) did not fare as well in April. Delta Air Lines reported a decline of 0.7% in its RPM from $15.65 billion in April 2012 to $15.54 billion in April 2013. However, its regional RPM declined 8.7% from $2.0 billion to $1.84 billion for the same period. In an effort to increase its RPM, the airline increased its ASM by 0.5%, but this effort was fruitless since its load factor declined by 1.0%.
United Continental Holdings Inc (NYSE:UAL) was the worst performer of these companies. Its domestic RPM declined by 3.1% from $7.79 billion to $7.73 billion for the same period. Overall, its RPM declined by 1.9% from $17.16 billion to $16.52 billion for the same period. Furthermore, its ASM declined by 4.3%, and due to lower available seats its load factor increased by 1.4%.
In brief, Alaska Air Group, Inc. (NYSE:ALK) may be taking market share from major carriers such as Delta Air Lines, Inc. (NYSE:DAL) and United Continental Holdings. Based on these reports, I believe Alaska Air Lines is an excellent choice to gain exposure to the airline industry. In addition, it is showing signs of growth.
Alaska Air Group’s aggressive expansion plans
The company has seen substantial growth this year, and I believe further growth can be expected. The company has announced the inauguration of new routes. On March 29, 2013, the company announced a daily flight between San Diego and Boston. On April 4, 2013, the company announced a twice-daily service between Seattle (which acts as the company main hub), and Salt Lake City. Last week, the company announced the expansion of its service via two daily routes: Portland-Atlanta and Portland-Dallas.
Conclusion
The most recent monthly traffic report and the announcement of the new routes should put investors’ mind at ease since the company is working on a strong shareholder-oriented business model. I believe the company should observe significant growth in 2013, and it should provide investors with capital appreciation. Overall, Alaska Air Group may be considered for a long position to gain exposure to the airline industry.
The article New Routes and Outstanding Monthly Traffic Report for Alaska Air Group originally appeared on Fool.com is written by Robinson Roacho.
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