Alaska Air Group, Inc. (ALK), JetBlue Airways Corporation (JBLU): Prepare to Benefit From a Sell-Off in the Airlines

Page 1 of 2

Shares of a few mid-sized passenger airlines have tumbled to various degrees over the past couple of months, declining from peaks reached earlier this year. I believe that the fundamentals for these point-to-point or regional carriers have not changed dramatically, particularly for the long haul. The current operating environment remains favorable, with jet-fuel prices having edged down a bit. It appears that overall market jitters can be blamed for the sell-offs. Thus, current valuations may well represent buying opportunities. Here’s a more in-depth look at the stocks under pressure.

Alaska Air Group, Inc. (NYSE:ALK) still a top airline selection after flying into turbulence

Alaska Air Group, Inc. (NYSE:ALK)

Alaska Air Group, Inc. (NYSE:ALK), a Seattle-based carrier, is not only expanding capacity somewhat aggressively, it also is keeping unit costs contained and building its fleet for the long term. Along with boosting the number of Hawaiian routes, it is also adding service out of San Diego. Alaska Air Group, Inc. (NYSE:ALK) has about 68 aircraft on firm order. Overall, it seems well positioned for continued market share gains and profit increases over the long term, should the environment cooperate.

Where Alaska Air Group, Inc. (NYSE:ALK) faces a bit of a challenge is that it is up against heightened competition on California-to-Hawaii routes and long-haul Alaska Air Group, Inc. (NYSE:ALK)-based departures, while launching start-up routes, as well. All of this adds up to airfare pressure and load factor (occupancy) declines to a modest extent.

Alaska Air Group, Inc. (NYSE:ALK) remains on pace for a strong earnings gain this year, on increased flying and stable expenses, though the economy and fuel price fluctuations are always factors. As for its three- to five-year prospects, they appear intact and the company should expand at a steady clip over that time. I recommend purchasing Alaska Air Group, Inc. (NYSE:ALK) shares at their currently subdued price. They are trading at a forward P/E ratio of 8.3x based on 2013 share earnings of $5.40.

JetBlue Airways Corporation (NASDAQ:JBLU) shares retreat, but growth strategy still taking hold

Like Alaska, JetBlue Airways Corporation (NASDAQ:JBLU) plans to expand seating capacity around 7.5% this year, with new service to small- and mid-sized cities. It also plans increased frequency on existing routes, supported by additions to the aircraft fleet. In fact, plans are for 13 new aircraft this year (three Airbus A320s, six Embraer SA (ADR) (NYSE:ERJ) 190s, and four Airbus 321s), bringing the total to about 140.

JetBlue Airways Corporation (NASDAQ:JBLU)’s formidable build-out of its network should continue to be facilitated by operating conditions. In its favor, demand on newly-launched business (higher-fare) routes has been on the rise, allowing for overall slight improvements in yields. Be aware that new service often takes some time to ramp up to profitability. In all, I expect JetBlue Airways Corporation (NASDAQ:JBLU) to perform well over the heavy air-travel June and September quarters, given no severe operating climate changes.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!