Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Delta Air Lines, Inc. (DAL), US Airways Group Inc (LCC): Latin American Expansion Is Key for the Growth of These Airlines

The airline industry has slowly recovered from the blow it received in 2007 and 2008. This has been aided in part by a global economic recovery. Further, the consumer sentiment’s latest reading was at multi-year highs. Passenger traffic has been strong in the recent past, and it is not likely to dim in the near future. As a result, the companies mentioned herein should be considered for long positions to gain exposure to the industry.

Delta Air Lines, Inc. (NYSE:DAL)

Good metrics are what we want!

Delta Air Lines, Inc. (NYSE:DAL) and US Airways Group Inc (NYSE:LCC) are two major airlines in the United States that also have a worldwide presence. Both companies trade with price-to-earnings ratios lower than the industry’s average of 31.6; Delta Air Lines, Inc. (NYSE:DAL) has a 18.5 ratio, while US Airways Group Inc (NYSE:LCC) has a 5.5. According to their most recent quarterly earnings reports, revenues for Delta Air Lines, Inc. (NYSE:DAL) remained unchanged at $8.5 billion, while US Airways Group Inc (NYSE:LCC)’ revenues increased by 10% to $3.4 billion. Both airlines also offer an excellent investment prospectus.

A look at Delta Air Lines, Inc. (NYSE:DAL)

Delta Air Lines, Inc. (NYSE:DAL) plans to bring capital appreciation to its investors through a hefty share repurchase program worth $1 billion over the next three years. Furthermore, the company has initiated a dividend offer of $0.06 per share, or 1.28%. The company should not have any issues paying its obligations due to healthy a balance sheet.

The company ended the last quarter with $1.0 billion cash from operations, up from $831 billion. Its free cash flow, although contracted slightly, was $357 million compared to $424 million a year ago. Investors should look for continuing free cash inflow and should expect dividend hikes as well.

So how is the company going to bring higher revenues in the near future?

The company is expanding operations internationally. The recent grand opening of Terminal 4 at the John F. Kennedy airport in New York will give the company a stronger presence in international markets. This is important because long-haul flights have better operation margins than short-haul since newer and more fuel-efficient aircraft are generally US Airways Group Inc (NYSE:LCC)ed for such operations.

The carrier has also partnered with Gol Linhas Aereas Inteligentes SA (ADR) (NYSE:GOL) to increase its exposure to the Brazilian market, positioning it to take advantage of the 2014 Soccer World Cup. The company has also been authorized to operate the Atlanta – Sao Paulo route, which is the most important economic center in South America.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.