Delta Air Lines, Inc. (DAL), Allegiant Travel Company (ALGT), JetBlue Airways Corporation (JBLU): Two Airline Stocks to Buy, One to Hold

The carrier recently called off its off-peak Hawaii flying, which has been bullishly received by investors. For no reason, the company has been seen as one of the two favorite low-cost ideas in the airline industry (the other being Spirit Airlines).

Before the release, investors were interested in knowing how the company planned to deploy its 757 fleet, which is currently operating on the Hawaii route. The company believes that demand for the Hawaii route flight is high in the summer months and hence has shifted the Hawaii capacity to domestic mainland routes where its 757 will be more profitable as compared to the MD-80.

Talking about players with high exposure to leisure, JetBlue Airways Corporation (NASDAQ:JBLU) is another name that comes to mind. JetBlue Airways Corporation (NASDAQ:JBLU)’s March RASM result was strong.

However, given broader concerns about revenue following a March RASM (I am talking about the general industry) outcome that was softer than expected, JetBlue Airways Corporation (NASDAQ:JBLU)’s RASM guidance was of interest to investors (before the earnings release). The company previewed a gain of 1.5% to 2.5% range in its April RASM. The RASM is expected to be softer than March in large part due to an early Easter impact.

Following its investor day, JetBlue Airways Corporation (NASDAQ:JBLU)’s tone was focused on the carrier’s revenue and growth opportunities. Barclays PLC (ADR) (NYSE: BCS) is neutral on the stock given that the company is expected to benefit from strong revenue generation and advantageous competitive capacity. Free cash flow is also improving. However, cost performance is calling potential for profitable growth and relative margin improvements into question.

Conclusion

Both Delta Air Lines, Inc. (NYSE:DAL) and Allegiant Travels are recommended as buys despite sluggish expected revenue growth in the near-term because both companies have been actively trimming their costs and hence improving their bottom-lines. However, JetBlue, despite an improving revenue base, hasn’t been able to keep its costs in control and hence is recommended as a hold.

The article 2 Airline Stocks to Buy, 1 to Hold originally appeared on Fool.com and is written by Masam Abbas.

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