Alaska Air (ALK) belongs to the sector that was badly affected by the pandemic, but the CEO of Causeway Capital Management, Sarah Ketterer believes that this airline stock is ready to lift off above the skies of the financial markets.
Ranked as one of the top fund managers by the research firm Morningstar, Sarah Ketterer said that a lot of airlines globally are well-positioned for recovery.
In an interview with CNBC, she said, “What’s so interesting about Alaska Air is that they are in process of consolidating their fleet of Boeing. So after this Virgin America acquisition that brought them in some inefficient aircraft that were Airbus related, they’re cutting costs. They cut management positions. They cut tons and tons of overhead,”, marked Sarah while noting that this move of Alaska Air is needed for its survival so as to not file for bankruptcy.
“Once the lockdowns are lifted, and you know they will be, because we have vaccines and it’s just a question of when not whether, the opportunity to take advantage of all this cost-cutting and greater efficiency, more seats and new aircraft mean they are likely to show a significant profit margin improvement over the next 2 years.” she noted talking about the high probability of an upward movement for airline stocks once the world gets back to normal.
“Alaska is one of several examples where we think investors can get more returns”. Ketterer said that the path forward will be a lot more travel for leisure than business travels. According to her, from November to December 2020, over a million passengers flow through U.S. airports within a single day. “Even on lockdowns, pent up demands. Can you imagine what it’s gonna be like especially with these low airfares which from the elasticity of demand perspective should spur a lot of increase bookings and those bookings are cash upfront for the airlines,”. She added by saying that the only one who didn’t raise any equity capital last year is Alaska Air and their balance sheet contains over a $3.5 billion. “They’re waiting for this increase in demand and its coming.”