The airline industry continues to rebound from lows seen in 2007 and 2008. It was not uncommon to think of the sector as a place where money goes down the drain. However, investors have been rewarded handsomely in present times.
What’s more is that I believe the rally is not over, despite many investors trying to call the top. Therefore, these companies seem to be a great choice for your growth portfolio.
Major airlines expanding
Delta Air Lines, Inc. (NYSE:DAL) reported an improvement in passenger traffic in its July report. Its revenue passenger miles (RPM) increased by 1.7% to 19.4 billion. It is worth noting that its Latin America section had a whopping 10.7% increase in RPM to 1.5 billion. Further, its International section posted a significant 4% increase to 8.3 billion.
For the carrier to meet the demand, it added 2.7% available seat miles (ASM) year-over-year to finish at 22.3 billion. Its load factor declined by 0.8% to 87.0%.
US Airways Group Inc (NYSE:LCC) also reported a gigantic jump in passenger traffic. Its RPM increased by 6.8% to 6.4 billion, and the company added 5.1% more ASM to finish at 7.29 billion. Its total load factor jumped from 86.7% to 88.1%. As with Delta Air Lines, Inc. (NYSE:DAL), the Latin America division saw a 10.9% increase in RPM from 492 million to 546 million. Its Atlantic section also posted a 6.6% increase in RPM.
Latin America is key for growth
The airlines realized that revenues from Latin America are increasing substantially. Further, long-haul flights provide the best operational margins because of the use of highly fuel-efficient aircraft.
Delta Air Lines, Inc. (NYSE:DAL) formed a partnership with GOL Linhas Aereas to expand its presence in the Brazilian Market. Further, Delta Air Lines, Inc. (NYSE:DAL) opened the first Latin American technical operations line maintenance in Sao Paulo.
In addition, the government gave tentative permission to Delta Air Lines, Inc. (NYSE:DAL) to expand its service from Atlanta to Sao Paulo with an additional daily nonstop flight. This should hike the company’s revenue from the Latin America section since the Brazilian city is the most important economic center in South America.
Lastly, the carrier inaugurated a $1.4 billion terminal in the JFK International Airport in New York. Further, it is remodeling Terminal 5 at the Los Angeles LAX International Airport. This should help the carrier expand its international destinations in the future.
US Airways Group Inc (NYSE:LCC) is also expanding operations into Latin America. The government approved the carrier’s request to operate a flight between Sao Paulo and Charlotte, S.C., the airline’s largest hub. This is the second destination in South America after Rio de Janeiro.