The airline industry has rebounded from lows observed in 2007 and 2008. Due to improving economic conditions across the map, customers are more prompt to travel nowadays. The consumer sentiment index is at multi-year levels. Therefore, investors should expose their portfolios to the airline industry to profit from this recovery.
Invest in the airline industry!
I have observed a general trend from airlines to expand into emerging markets, mainly Latin America. Delta Air Lines, Inc. (NYSE:DAL) entered a code-share agreement with Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL), giving the Atlanta-based airline exposure to the Brazilian market.
The company’s expansion strategy is appealing for investors. Not only has Delta Air Lines, Inc. (NYSE:DAL) announced the code-share expansion, but it also opened the first Latin American technical operations line maintenance in Sao Paulo.
Further, Delta Air Lines, Inc. (NYSE:DAL) has been granted temporary permission by the U.S. Department of Transportation to operate the route Atlanta – Sao Paulo. The Brazilian city is the most important economic center in South America.
These are strong reasons for investors to consider investing in Delta Air Lines, Inc. (NYSE:DAL) to gain exposure to the industry.
On top of that, investors should see capital growth because the carrier declared a quarterly $0.06 per share dividend back in May. Further, the board authorized a $500 million share-repurchase program to be completed no later than June 30, 2016. The airline is in the best position to start these programs because it reported $357 in free cash flow in its most recent earnings report.
The stock trades with a price-to-earnings ratio of 19.4, compared to the industry’s average of 33.6
Another airline worth considering
Also, the merger with American Airlines has been approved by shareholders, and the board of directors for the new American Airlines has been elected. The merger positions US Airways Group Inc (NYSE:LCC) as the carrier with the largest international exposure in the world. Nothing to sneeze at.
According to its latest earnings report, US Airways Group Inc (NYSE:LCC)’ revenue rose by 7% to $3.4 billion, and its net income jumped from $48 million to $69 million. Its balance sheet carries below-average debt, with a debt-to-equity ratio of 1.7 compared to the industry’s average of 2.0. The stock trades with a P/E of 5.9, which may be regarded as a value play.
Bring the investment spirit on!
In addition, the carrier hosted two open houses for new flight attendants in Chicago. The hiring of employees is a strong sign of company growth.
Last but not least, Spirit Airlines Incorporated (NASDAQ:SAVE) reported astonishing traffic in June. Its revenue passenger miles (RPM) rose by 25% to 1.0 billion. To meet the passenger demand, the carrier augmented its available seat miles by 22% to 1.2 billion. Its load factor increased by 2.2% to 88.3%. In brief, the carrier is having strong passenger traffic, and it is adding more aircraft to capture as much revenue as possible.
The stock trades with a P/E ratio of 21.7, well below the industry’s average of 33.6
The (Robin) Foolish bottom line
The airline industry is rebounding, and you should take advantage of it today. The three carriers herein described offer an appealing investment prospectus, which surely will bring capital appreciation to you growth-oriented portfolio. They are expanding rapidly by opening new routes to South America and by adding new aircraft to the fleets.
Robinson Roacho has no position in any stocks mentioned. The Motley Fool owns shares of SPIRIT AIRLINES INC. (NASDAQ:SAVE) Robinson is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article An Easy Way to Invest in the Airline Industry originally appeared on Fool.com is written by Robinson Roacho.
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