US Airways Group, Inc. (LCC), American to Merge: So What for Airline Stocks?

JetBlue Airways Corporation (NASDAQ:JBLU)

The first of those discounted carriers I mentioned, JetBlue is doing crazy things like reporting a profit. It reported $376 million in profit for 2012. In 2011 that number was $322 million. While there might be some fourth quarter weakness in 2012’s numbers, that’s still a good number for any airlines.

Small, regional and intra-U.S. flights are what the firm specializes in (only 15% of its flights go outside the borders). The stock was basically flat over the last 12 months but that hides a drop to $4.15 last May and a recovery to $5.98 now. Some analysts have doubts about the company’s ability to continue performing but it might be worth a bit of risky money.

Southwest Airlines Co. (NYSE:LUV)

Ah, the darling of the skies. Everyone loves to praise Southwest. Beyond that, some traders and analysts like to praise the firm, or at least bet on it. There are things here to like. Southwest is a growing firm that’s now trying to build on its low-cost reputation to leverage a bit more money out of its customer base by offering optional upgrades. If they don’t get carried away on those things should go well.

The firm is trading well, growing 47% since last April (though it had dropped before then) and a P/E of 21.23 indicates that there’s some buying optimism out there right now. If you’re into owning an airline this is one you should definitely have in your portfolio.

Alaska Air Group, Inc. (NYSE:ALK)

Don’t be thrown off by the name. ALK does own Alaska Airlines but it also owns Horizon Air and does a pretty good job of it. Some analysts are very hot on it these days. The company defines itself as a smaller, agile firm and is showing the growth to justify the brag. The firm’s net profit margin almost doubled from 2011 to 2012, going from 3.89% to 6.79%, and I believe in it. Since early June the stock has climbed from $32.36 to $49.52 and I’m thinking there’s still some value in there to be had.

Owning airline stock isn’t for the faint-hearted and hasn’t been for more than 30 years. The after-effects of deregulation are STILL being felt in the industry and may continue to be felt for another 10 years or more. But what is clear, at least to me, is that smaller is better when you invest in this industry. Sure, keep an eye on the big boys, but set your default to ‘NO’ for a long while, yet.

Good luck!

Follow Nate on Twitter: @natewooley

More columns by Nate Wooley:

• Growing Consumer Spending and Retail Stocks
• The State of the Union and Infrastructure Stocks
• Mature Tech Stocks for Adult Investors

The article US Airways, American to Merge: So What for Airline Stocks? originally appeared on Fool.com and is written by Nate Wooley.

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