Alaska Air Group (NYSE:ALK) was supposed to get walloped in 2014, as Delta Air Lines (NYSE:DAL)
aggressively expanded its Seattle-based operations, pressuring revenue
and margins for the smaller regional carrier that relies upon Seattle as
a major hub. As it happened, though, Alaska Air had a pretty good year
from a revenue, margin, and stock performance perspective as careful
cost management, revenue enhancement, and competitive efforts paid off.
It's
tough for me to call Alaska Air a great bargain today. I think it is an
exceptionally well-run airline and I like the prospects for higher
payouts as the company returns surplus cash to shareholders. While the
shares do seem undervalued on the basis of next year's projected
EBITDAR, it takes an averaged double-digit FCF margin over the next
decade to support a low-to-mid $70's fair value by discounted cash flow
and that's more aggressive than I'm comfortable with from an airline.
That said, investors don't seem to often buy or sell airlines on the
basis of long-term cash flow, so more aggressive investors may still
find a good trading opportunity here.
Please follow the link for more:
Alaska Air Thriving In More Crowded Skies
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