An Airline Stock Ready for Takeoff
Most spend more time avoiding the airline sector than they do seeking it out, but the time is ripe for buying this sector stalwart now, writes Elliott Gue of Energy and Income Advisor.
The second-largest US air carrier, Delta Air Lines (DAL) has consistently ranked toward the top of the field in terms of year-over-year growth in revenue per available seat mile (RASM), a testament to the company’s success squeezing additional revenue out of its capacity.
Much of these RASM gains stem from the airline’s market share gains among business travelers, the industry’s highest-margin customers. In 2012, revenue from corporate travelers surged 11.1% from year-ago levels, with broad-based strength across a range of industries.
Delta Air Lines’ increasing popularity among business travelers reflects a number of strategic initiatives. For one, management has sought to enhance its services at key hubs for business travelers, such as New York City’s LaGuardia Airport and London’s Heathrow Airport. Through a series of departure slot swaps with other airlines, Delta Air Lines has increased its share of departures from LaGuardia Airport to 46% in 2012—more than double the share of runner-up American Airlines.
The company is also redesigning its terminal at the airport to make it more convenient for business travelers. These moves have also enabled Delta Air Lines to shift some domestic flights to LaGuardia from New York City’s John F. Kennedy Airport, freeing up slots for additional international departures from Kennedy Airport.
With Delta Air Lines’ business traveler volumes up 11% in New York City last year, these moves appear to have paid off.