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Delta Air Lines, Inc. (DAL), Southwest Airlines Co. (LUV), United Continental Holdings Inc (UAL): Three Airline Companies to Buy

In addition, United Continental Holdings Inc (NYSE:UAL) reduced its flying capacity by 5% in the first quarter compared to last year. This flying capacity was reduced from markets like Trans-Atlantic, Europe, Domestic U.S., Latin America, and the Asia-Pacific. The reason for this decline in flying capacity was to reduce the number of empty seats on its flights. This has improved the occupancy rates of the airline to 81.1% in the first quarter of 2013, compared year over year. By the end of this year, it plans to reduce its flying capacity by 0.75% to 1.75% on an annual basis.

In order to increase the passenger traffic, United Continental Holdings Inc (NYSE:UAL) is focusing on providing better customer service to improve the flyers’ experiences with the airline. It includes an in-flight Wi-Fi facility, flat-bed seats in premium class, live television in more than 200 aircrafts, and more legroom in economy seating. These factors will help United in regaining the lost passenger share from its competitors and boost the revenue of the airline, as the passenger segment contributes 86.68% to the total revenue of the company.

Also, United Continental Holdings Inc (NYSE:UAL) is focusing on reducing its debt. Through the past four years, it has been able to bring down its debt by $8 billion, which includes low-quality and high-interest debt. The debt taken on during the acquisition of Continental has also decreased to $12.1 billion as of March 2013, compared to $15.1 billion at the end of 2010. This activity will bring down the interest payments to $700 million by this year, from $1 billion in 2010.

United Continental Holdings Inc (NYSE:UAL) also aims at paying off the 6.75% notes worth $800 million, due in 2015. It will settle this debt in October 2014, as they are pre-payable from this period. This will further help the company in stabilizing the amortization schedule in the future.

Henceforth, United Continental Holdings Inc (NYSE:UAL) will benefit from these debt payments, which will result in reduced risk in the business, along with increment in earnings through reduced interest payments.


This time, Delta Air Lines, Inc. (NYSE:DAL) has well worked out its strategies, keeping in mind the interests of investors. With reducing debt and cash distribution, Delta has improved its financial position.

Southwest Airlines Co. (NYSE:LUV) provides periodical distribution of cash to its shareholders through dividends and share repurchase programs.

United Continental Holdings Inc (NYSE:UAL) has planned its strategies well to attract the passengers it lost to its competitors last year with a range of services and reduction in debt.

I suggest buying all three stocks.

The article 3 Airline Companies to Buy originally appeared on and is written by Shweta Dubey.

Shweta Dubey has no position in any stocks mentioned. The Motley Fool recommends Southwest Airlines. Shweta 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.

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