The airline industry has been critiqued and accused of being a lost investment for some time. However, overall the industry is rebounding, and most airlines are experiencing increasing passenger traffic as well as reducing costs of operation. Aside from describing the usual suspects such as Delta Air Lines, Inc. (NYSE:DAL) and US Airways Group Inc (NYSE:LCC), I will discuss a regional airline that offers appealing investment prospects, and it should be considered as a long position in a growth portfolio.
The little giant
Furthermore, the company’s revenue increased 18% to $641 million for the first three months ending in March 31. Operating income increased 28% to $142.6 million, and earnings resulted in $113 million, or $2.56 per share. The company saw stronger demand for passenger traffic in the first quarter of 2013. Its revenue seat miles (RSM) increased 19% to $3.5 million, and what’s more is that its costs of operation declined. Its cost per available seat mile (CASM) declined 3.6% from slightly higher than $0.11 to slightly less than $0.11.
I believe the company should continue to provide capital growth to its investors. Copa Holdings, S.A. (NYSE:CPA) took delivery of two The Boeing Company (NYSE:BA) B737-800s in the first quarter of 2013, and it is expected to introduce seven more this year. Not only will its available seat miles (ASM) increase, which is directly proportional to the revenue-generating ability of the carrier, but the company will also reduce its costs of operation as more fuel-efficient aircraft are put into use.
Another reason why I believe the company offers an interesting investment prospectus is because of its location. Copa Holdings, S.A. (NYSE:CPA) operates in Panama City, which acts as a bridge between flights between North America and South America. Through its alliance codes, the company should continue to have increasing passenger traffic through connecting flights.
A little help is always appreciated!
Copa Airlines is a member of Star Alliance in conjunction with 26 other airlines around the world, including United Continental Holdings Inc (NYSE:UAL) and US Airways Group Inc (NYSE:LCC). The code-share agreement should benefit the three carriers and improve revenue. Through Copa Airlines’ Hub of the Americas, passengers can comfortably connect to any city between Latin America and the U.S.
United Continental Holdings Inc (NYSE:UAL) recently increased its revenue by 1.4% from $8.6 billion to $8.7 billion. Its operating expenses increased 1.3% from $8.8 billion to approximately $8.9 billion. By delving into its operation costs, the company was able to lower its aircraft-fuel expenses by 5.5%, but salaries and related expenses rose 12%. Overall, due to less costs of operation, the company’s net loss narrowed from a loss of $448 million to a loss of $417 million.
United Continental Holdings Inc (NYSE:UAL) is reducing its operational costs by replacing its B767-200 and B757-200 aircraft with the more fuel-efficient version, the B737-700. This should help to increase its net income. Further, since oil prices have been readily stable so far this year, the company should not see increases in costs of operation.
Lastly, the company is reintroducing the The Boeing Company (NYSE:BA) B787 Dreamliner for regular flights. The aircraft is more fuel efficient than previous versions, making long-haul costs per available seat mile decline significantly. Overall, I believe that while United Continental Holdings Inc (NYSE:UAL) is still producing negative income, it seems to be getting on its feet.
US Airways Group Inc (NYSE:LCC) will have the largest international market share after the merger with American Airlines is complete. The company trades with a P/E of 5.5, and a forward P/E of 5.9. These values are well below the industry’s average. Also, its price-to-book ratio is 1.7, while the industry’s is 2.6. Its revenue recently increased 4% to $3.4 billion, which resulted in a net income increase of 43% to $69 million, or $0.26 per share.
The company is expected to boost its revenue through a larger international market share. It is important to say that the profit from long-haul flights is substantially higher than short flights. Furthermore, the company is set to decommission its The Boeing Company (NYSE:BA) B757-200 and B767-ER starting in 2017.
Also, its The Boeing Company (NYSE:BA) B737-400 will be phased out, and Airbus A321-200 will replace those planes. This strategy allows for the company to reduce its fuel-related expenses by utilizing fuel-efficient aircraft. Lastly, its consolidated traffic increased by 4.4% in April on a year-over-year basis. In brief, I am convinced that US Airways Group Inc (NYSE:LCC) is poised for growth in the interim!
Wrapping it up
Copa Holdings, S.A. (NYSE:CPA) offers the potential for a good investment. The carrier’s hub is located strategically and is the bridge between connecting flights between North and South America. Further, the carrier’s large code-share partners should provide steady passenger traffic. Finally, the company shows signs of growth by incorporating new aircraft. In brief, Copa Holdings, S.A. (NYSE:CPA) may be an ideal option for a growth portfolio.
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.
The article You Must Take a Look at This Airline! originally appeared on Fool.com is written by Robinson Roacho.
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