Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV): Take Advantage of the Recovery of This Sector

Page 1 of 2

The airline industry has been rebounding from its lows of 2007 and 2008. Higher consumer sentiment readings have propelled stronger passenger traffic in most carriers. Revenues are strong and airlines are showing outstanding growth. Hence, investors should pick the airlines that have the highest probabilities of bringing capital appreciation for growth portfolios.

Dividends and Share Repurchases

Alaska Air Group, Inc. (NYSE:ALK), Delta Air Lines, Inc. (NYSE:DAL) and Southwest Airlines Co. (NYSE:LUV) bring capital appreciation to their investors in the form of dividends. It is not usual for airlines to offer dividend payments. However, these companies are in the best positions to do it.

Alaska Air Group finished the last quarter with a 10% increase in cash from operations to $212 million, and its free cash flow increased from $85 million to $109 million. Furthermore, revenues rose by 10% to $1.1 billion.

Delta Air Lines, Inc. (DAL)Delta Air Lines, Inc. (NYSE:DAL) finished the quarter with increasing cash from operations from $831 million to $1.0 billion. Further, its free cash flow ended at $357 million, from $424 million a year ago. The contraction reflects the dividend payment, which was instated in the previous quarter. Its revenues remained unchanged at $8.5 billion.

Southwest Airlines Co. (NYSE:LUV)’s cash from operations declined from $1.2 billion to $983 million. Additionally, its free cash flow contracted from $1.1 billion to $450 million. However, the company spent an enormous amount of cash in its share repurchase program, and the shares outstanding declined from 772 million to 727 million.

Based on these metrics, these airlines should not have issues regarding the dividend payment. Alaska Air Group, Inc. (NYSE:ALK) was the latest who joined the dividend-payment party. The company announced on Thursday the initiation of a dividend offer of $0.20 per share, to all shareholders of record as of August 6. Delta Air Lines, Inc. (NYSE:DAL) announced a $0.06 dividend payment in its press release on May 8. Southwest Airlines Co. (NYSE:LUV) has offered a dividend for more than 36 years. It was recently hiked from $0.01 to $0.04 in May.

What’s more is that these carriers are also bringing capital appreciation through strong share repurchase programs.

In September, Alaska Air Group announced its plan to repurchase $250 million worth of stock. Although the program does not have an expiration date, the company plans to complete it by December 31, 2014.

Delta Air Lines, Inc. (NYSE:DAL), on the other hand, has authorized a $500 million share repurchase program, to be completed no later than June 30, 2016. Southwest Airlines Co. (NYSE:LUV) has expanded its original $1 billion share repurchase program to $1.5 billion.

Overall, these companies will bring value to their investors in the form of dividend and share repurchase programs. Hence, they offer an excellent investment prospectus for any growth-oriented portfolio.

What are the tailwinds for these companies?

Delta Air Lines, Inc. (NYSE:DAL) has inaugurated the Terminal 4 in the JFK International Airport in New York. Thus, its international presence may increase significantly. Long haul flights are important for carriers because they offer the best operational margins per seat. Further, the company is remodeling the Terminal 3 at JFK. With these terminals, the company will expand operations between JFK airport and international destinations. Finally, the company has acquired 49% of Virgin Atlantic Airways, which should expand its operations in the Atlantic region.

Southwest Airlines Co. (NYSE:LUV) is a “regional” carrier with huge presence in the United States. The company offers low-price flight tickets, which is a plus. Hence, the passenger traffic should remain strong for this carrier. As proof, its revenue passenger miles for the month of June increased by 2.3% to 9.8 billion on a year-over-year basis. Its available seat miles, which means the seats available for purchase, increased by 1.7% to 11.5 billion, and its load factor increased 0.6% to 85%. These metrics are outstanding, at least.

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 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

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!