The airline industry has rebounded from lows observed in 2007 and 2008. Due to improving economic conditions across the map, customers are more prompt to travel nowadays. The consumer sentiment index is at multi-year levels. Therefore, investors should expose their portfolios to the airline industry to profit from this recovery.
Invest in the airline industry!
I have observed a general trend from airlines to expand into emerging markets, mainly Latin America. Delta Air Lines, Inc. (NYSE:DAL)
entered a code-share agreement with Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL)
giving the Atlanta-based airline exposure to the Brazilian market.
The company’s expansion strategy is appealing for investors. Not only has
Delta Air Lines, Inc. (NYSE:DAL)
announced the code-share expansion, but it also opened the first Latin American technical operations line maintenance in Sao Paulo.
Delta Air Lines, Inc. (NYSE:DAL) has been granted temporary permission by the U.S. Department of Transportation to operate the route Atlanta – Sao Paulo. The Brazilian city is the most important economic center in South America.
These are strong reasons for investors to consider investing in
Delta Air Lines, Inc. (NYSE:DAL) to gain exposure to the industry.
On top of that, investors should see capital growth because the carrier declared a quarterly $0.06 per share dividend back in May. Further, the board authorized a $500 million share-repurchase program to be completed no later than June 30, 2016. The airline is in the best position to start these programs because it reported $357 in free cash flow in its most recent earnings report.
The stock trades with a price-to-earnings ratio of 19.4, compared to the industry’s average of 33.6
Another airline worth considering
US Airways Group Inc (NYSE:LCC)
is also expanding into Latin America. The new route between Charlotte, N.C., the carrier’s largest hub, and Sao Paulo started on June 8. Customers from 85 cities in the United States will have a convenient one-stop access to Sao Paulo. Investors should delve into the carrier’s third-quarter 2013 earnings report to determine if the load factors for this route are high in comparison with the overall load factor. Although the date for the third-quarter 2013 earnings report is not set, investors may expect it to be around the fourth week of October.
Also, the merger with American Airlines
has been approved by shareholders, and the board of directors for the new American Airlines has been elected. The merger positions US Airways Group Inc (NYSE:LCC) as the carrier with the largest international exposure in the world. Nothing to sneeze at.