US Airways Group, Inc. (LCC), Delta Air Lines, Inc. (DAL), United Continental Holdings Inc (UAL): Flying High or Low? A Take on The Airline Industry

After Continental’s acquisition in 2010, United has become the largest airline operator in the U.S. Over the last several years, the firm has focused on catering to premium-paying customers, and close to 30% of its capacity has been destined to that purpose. Nevertheless, the industry remains unstable and competition has risen considerably. Hence, profits for the firm have not met expectations.

Financially, United is far from its zenith. Besides last year’s losses, cash flow has not matched increasing debt levels for quite awhile. Also, revenue has stagnated, curtailing a much-needed cash flow recovery. Additionally, the industry’s instability limited positive results derived from important structural reforms.

Currently, United is expected to save $9 billion in taxes due to previous losses, which will help it stabilize some finances. It is trading at a 77% premium to the industry average price-to-earnings ratio, and is expected to suffer from global recession. So, it is recommended to hold this stock, since it remains very risky, the company’s future is uncertain, and structural reform benefits were cut short.

Landing

The airline industry is known for its instability and volatility. Nevertheless, future shareholders can invest in certain companies with well-proven finances and management. US Air holds great potential, given its room for expansion and increasing cash flow, which should allow it to face any headwinds.

The article Flying High or Low? A Take on The Airline Industry originally appeared on Fool.com.

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