Overall, Delta Air Lines, Inc. (NYSE:DAL) is expanding to major international markets with the opening of Terminal 4 in the JKF International Airport, and the new codeshare agreement with Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) may bring additional passengers to the airline.
US Airways Group Inc (NYSE:LCC) is also expanding its international presence. Its shareholders have recently approved the merger with American Airlines. Also, the company has already elected the board of directors for the new American Airlines. With this merger, the company will have the largest presence internationally among U.S. carriers. The expansion may bring additional revenue.
The company is also expanding routes to Brazil. The airline was tentatively awarded permanent authority to operate the route Charlotte, N.C. to Sao Paulo, Brazil.
In addition, the company is bringing $100 million from a trust certificate offering to finance newly acquired aircraft. Also, the carrier is expected to deliver seven Airbus Aircraft during the second half of 2013. In this fashion, it will increase its ASMs. Investors must remember that the ASMs are simply the capacity for the aircraft to bring revenue. Therefore, US Airways Group Inc (NYSE:LCC) is expanding its revenue-generation ability.
Finally, United Continental is struggling to maintain operational margins by adding more efficient aircraft. The carrier has announced the conversion of 25 previously ordered Airbus A350-900 to A350-1000. Further, the company has added 10 more aircraft to the existing order totaling 35. They are scheduled to begin delivery as early as 2018.
These aircraft will replace older aircraft serving long-haul, high-demand markets. Therefore, the carrier’s operational margins should increase.
In addition, the carrier has increased its order for The Boeing Company (NYSE:BA)‘s B787-10s “Dreamliner” by 20 to 65. United Continental is the North American launch customer for the 787-10s, and it expects the delivery of its first aircraft in 2018. The airline will be able to modernize its international fleet by replacing older, less efficient aircraft.
Overall, the company’s operational margins should increase with the replacement of old aircraft by newer, more fuel-efficient airplanes. However, investors should look for higher passenger traffic before investing.
My two cents
Delta Air Lines, Inc. (NYSE:DAL) and US Airways Group Inc (NYSE:LCC) have been continuously expanding to international markets. Their June monthly traffic report shows stronger passenger traffic. Further, they are meeting the high demand by opening new international terminals, merging with other airlines, and opening new routes. Therefore, these stocks present an appealing investment prospectus, and they should be considered to gain exposure to the industry.
United Continental is improving its operational margins by replacing older aircraft with newer and more fuel-efficient airplanes in long-haul flights. It is important because long-haul flights have the best operating margin per seat. However, investors should look for improving passenger traffic before committing to this airline.
The article The Airline Industry Is Likely to Fly Higher! originally appeared on Fool.com and is written by Robinson Roacho.
Robinson Roacho has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Robinson is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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