While earnings growth is critical to Air France KLM, the airline’s book value is far higher than the current share price giving a value play on this airline. Airlines, especially legacy ones, often have low or negative book values due to large debts and other obligations but Air France KLM proves an exception to this rule trading at less than half of its book value. This is not to say the shares will double tomorrow but the book value does provide a positive look at what’s inside the airline.
Air France KLM also stands to benefit from Delta Air Lines, Inc. (NYSE:DAL)’s Virgin Atlantic purchase since it may bring Virgin into the Skyteam alliance of which Air France KLM is a member. However, investors will need to consider the possibility that Virgin will remain on its own and only take on the joint venture with Delta Air Lines, Inc. (NYSE:DAL) in place of joining the alliance.
While International Consolidated Airlines Grp (LON:IAG) and Air France KLM are European based, the networks they are based around are worldwide in nature. Through a series of airline alliances, IAG is able to codeshare with American Airlines (and soon US Airways which is expected to be merged with American) and Air France KLM runs codeshares with Delta Air Lines, Inc. (NYSE:DAL) allowing it to take advantage of the network of one of the world’s largest carriers. For investors willing to take on the risks associated with the airline industry, IAG and Air France KLM offer a way for U.S. based investors to diversify their holdings in a global industry.
The article A Look At Foreign Airlines Part One: Europe originally appeared on Fool.com and is written by Alexander MacLennan.
Alexander MacLennan owns shares of Delta Air Lines. The Motley Fool has no position in any of the stocks mentioned. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.