Delta Air Lines, Inc. (DAL), US Airways Group Inc (LCC): The Positive Beat Continues for the Airlines

Even with all the advanced technologies that The Boeing Company (NYSE:BA) puts into the latest airplanes, the airlines currently spend substantially more money on fuel. US Airways Group Inc (NYSE:LCC) only spent $320 million directly on airplane maintenance and rent and possibly another $100 million via the Express segment for a total of $420 million.

A dramatic decline in fuel costs would lead to short-term profit surges for the airlines.

Conclusion

At only 5-6x current year earnings estimates, the airline stocks are cheap especially if the sector has made a dramatic shift toward a focus on profits. The first-quarter reports from Delta Air Lines, Inc. (NYSE:DAL) and US Airways Group Inc (NYSE:LCC) were very promising that the industry profit shift is legitimate. It remains to be seen whether the smaller regional plays will get more aggressive or if the unions will begin demanding more spoils from the profits fountain as in the past.

The sector has become a potential home run investment, but any investor needs to keep one eye on the news. Any day the alarms could go off as some billionaire gets the bright idea of starting up a major competitor. Load up on the stocks until that happens.

The article The Positive Beat Continues for the Airlines originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.