Tweet
Alaska is a U.S. state situated in the northwest extremity of the North American continent. Bordering the state to the east is the Canadian Yukon Territory and the province of British Columbia, the Arctic Ocean to the north, and the Pacific Ocean to the west and south, with Russia (specifically, Siberia) further west across the Bering Strait. Alaska is the largest state in the United States by area, the 4th least populous and the least densely populated of the 50 United States. Approximately half of Alaska's 731,449 residents live within the Anchorage metropolitan area. Alaska's economy is dominated by the oil, natural gas, and fishing industries, resources which it has in abundance. Tourism is also a significant part of the economy.
Although it had been occupied for thousands of years by indigenous peoples, from the 18th century onward, European powers considered the territory of Alaska ripe for exploitation. The United States purchased Alaska from Russia on March 30, 1867, for $7.2 million ($121 million adjusted for inflation) at approximately two cents per acre. The area went through several administrative changes before becoming organized as a territory on May 11, 1912. It was admitted as the 49th state of the U.S. on January 3, 1959.
The name "Alaska" had been introduced in the Russian colonial period, when it was used to refer to the peninsula. It was derived from an Aleut idiom, which figuratively refers to the mainland of Alaska. Literally, it means object to which the action of the sea is directed. It is also known as Alyeska, the "great land", an Aleut word derived from the same root.
One can see there are a lot of great things associated with Alaska. Every now and then some perhaps questionable products are derived from there as well.
But never mind all that, if you haven’t been to Alaska, maybe it’s time for you to check it out. It stays light out forever in the summer so if it’s Vitamin D you are looking for, think about taking a trip. How do you get there? I thought you’d never ask. How about Alaska Airlines. I love Alaska Airlines. In fact I love it so much, I bought the stock.
Today I bought stock in Alaska Airlines (ALK) at 92.74. I will sell it in 4 – 6 weeks at 107.39. Here’s why I like ALK:
It starts with a mighty good chart. Not unlike an airplane taking off to Alaska.
The stock is up 61% in the last 52 weeks, yet its PE is only around 13. Even better, it pays a 1% dividend, so your money isn’t sleepy when you invest it. The global aviation industry holds a steady outlook for 2014 as solid economic recovery and rising cargo demand lend optimism to the sector. The outlook is particularly favorable for the U.S. economy, with GDP growth expected to materially improve from the pace of the last few years. With the world’s largest economy improving, North American airlines look brighter for 2014. Consolidation benefits, growing travel demand and a number of new and enhanced ancillary revenues also provide impetus. The U.S. airline industry is expected to remain profitable over the next two decades given the improving worldwide economic activity. An uptick in economic activity will fuel demand for airline service. Passenger enplanement is expected to grow 0.8% to 745.5 million in 2014 and about 2.1% in the future, reaching $1.03 billion by 2028 and nearly $1.15 billion by 2034. Airlines still trade at healthy discounts to the market given their abysmal historical track record, but that was before the excess capital was shaken out of the market and before all of these mega mergers which has eliminated cut throat price wars.
The FAA projects air traffic, customarily measured in billions of revenue passenger miles (implying a unit of one mile flown by one passenger), to grow many folds over the same period. Revenue passenger miles will jump from 822.2 billion reported in 2012 to almost 1.47 trillion by 2034 at an average annual rate of 2.7%.
Now that we have established that the industry is on solid footing, what about Alaska Airlines? ALK won their sixth consecutive J.D. Power award for highest in customer satisfaction among traditional network airlines. This is one of the most respected measures of customer service in the industry. Recent media results indicate that they have improved even further in the last 6 months.
Let’s ask the customers:
“Alaska Airlines has everything you want from an airline. Cheap airfares, good service aboard and at the airport and clean planes. They even give you a snack and a beverage! No delays or lost baggage. What a pleasure to fly with Alaska!”
“Alaska Airlines is by far my favorite airline to fly. They consistently have good service, are generally on-time or EARLY! and they really do care about their employees and it shows. They have updated their gates in Seattle and most of their west coast airports to have "Power at the gate" so you aren't running around searching for an outlet and then sitting on the floor next to it so someone doesn't steal your phone. They are upgrading their planes as often as reasonably possible, and they offer much better seat pitches, fresh food/picnic packs, and electronic use throughout the flight now (since FAA has cleared mobile devices in airplane mode)! I'm not going to say that they are perfect, but for a domestic airline (read no long haul international flights) they are the best bang for your buck.”
“They probably have the best frequent flyer program as far as domestic flights go and they definitely deliver there. With their expansion of flight path offerings I will for sure be flying Alaska for many more years to come!”
“I'm sure there are a lot of people who've had bad run ins with any airline but this is one of the best to deal with. For those of you who don't travel much I'll hear the same complaints about all the airlines, but it's not necessarily a reflection on the company, it may just be the market in general. Moving on...
I've had flight attendants see me in line at Starbucks and ask me where I'm going. We chat a little and he offers to pick up my coffee tab, tells me the flight attendants on my flight are spectacular and to have fun on my trip. No, he was not trying to pick me up, (i'm pretty sure he swung the other way). Fast forward a year, and he recognizes me on another flight but this time he's my flight attendant. He's as great on the plane as he was in the terminal.”
“I've flown about 200,000 miles with Alaska since mid-2006 and I think I can say in all honesty that I've had about 2 bad experiences. Granted I don't check bags unless I'm bringing back wine from Napa Valley, or some other circumstance, but from their advertisements, (get your bag in 25 minutes or get $25) I'd say they do a pretty good job. I've flown many different airlines, NWA, Delta, Hawaiian, United, Frontier, US Airways, Jet Blue, Air France, Korean Air, Asiana, etc. etc. but I'd have to say I favor Alaska. BTW, if you're a MVP or MVP Gold the perks just keep getting better (Free first class upgrades, free checked baggage, lots of frees.... and it's served with a smile)! And just FYI, as an engineer I fly Alaska because they are proudly an all Boeing fleet. I'm trusting my life to these people and I'm not about to fly Airbus unless I have no other options.”
“Any serious flyer can truly appreciate Alaska Airlines. In fact, anyone that lives in the great Pacific Northwest is blessed to have such a great airline in its back yard. Flying is so aggravating these days but Alaska makes it is great as it can. I routinely pay a little more to fly Alaska. It is much more pleasurable than flying CattleCar Airways!.”
“Staff is friendly. Seating area was OK. The standard airport fare with a small exception. Blue glowing light under the seat. It wasn't a flotation device or a bomb. It was a power adapter. As a weary traveler, with my devices uncharged, it was a happy sight indeed. An oasis in the middle of power desert. This review is being typed up while charging
. I'm flying Alaska whenever I can.....or visit their seating area 
”
“I have to say Alaska Airlines makes American Airlines look like an amateur production. I almost felt like an Alaska employee as I put my own baggage tags on my luggage. In flight service was nice and the seats were comfortable. I selected Alaska for a trip from San Antonio to Seattle because it was non-stop. That's a huge plus in today's travels. I cannot believe how fast they deliver baggage on both sides of the trip. The bags were coming out of the chute before we could walk from the plane. American, Delta, and United should take notes. I'll be on Alaska Airlines when I get the chance.”
Now then, many airline stocks have easily beaten out the S&P 500 in the year-to-date time frame. In fact, several companies have put up gains in excess of 20% to kick-off 2014, shaking off the overall market’s volatility so far this year.
Alaska Air Group has a big operation in Alaska, including a hub in Anchorage. The company also has heavy exposure in the Washington and Oregon with headquarters in Seattle. ALK is also rapidly expanding to other markets. So far so good this year operationally as well. March traffic is up over 4% from last year and their fleet has an 88% on time stat. That’s awesome.
The ANAL-ysts have been bumping up their estimates the past few months, up to $6.92/share for 2014 and to $7.79/share for 2015. We’ll get back to these idiots later in the flight.
ALK scored well on my quant screen which weighted momentum and value among the highest factors. As usual, that is an attractive combination – an investment which poses relatively low risk (on a Debt/EBITDA and EV/EBITDA basis) combined with tremendous price movement (fueled by large inflows from institutional holders—institutional ownership sits at 98.5% versus an industry average of around 75%).
Why all the attention? ALK also capitalizes on one of the highest recent growths in Revenue per Available Seat Mile, the airline industry’s main efficiency metric. The planes are full and on time. They are efficient and ridiculously profitable.
ALK represents a business model with dominant routes (USA-Hawaii, USA-Alaska, and most regional west-coast travel) on which it can build eastward without harming its cash flow margin (which is currently among the highest in the industry). With the recent mega mergers (American/US Air and United / Continental), Delta has been left holding its dick in its hands. So there has been a lot of talk about a merger with Delta which would offer shareholders a significant premium. Just sayin.
Here’s the most compelling reason to love this stock. Travelers on Alaska Airlines flights between Anchorage and Fairbanks and Anchorage and Kodiak will soon enjoy an extra infusion of local flavor in the form of Silver Gulch Brewing & Bottling Co.'s Old 55 Pale Ale.
"Silver Gulch is a successful local business based in the Fairbanks area, and we're excited to offer their beer on our Q400 flights within Alaska," said Marilyn Romano, Alaska Airlines' regional vice president – Alaska. "This continues our tradition of serving products made in the communities we proudly serve."
Passengers will have the opportunity to sample the moderately hopped, American-style pale ale free of charge beginning March 3, when Alaska Airlines introduces the Bombardier Q400 to the state of Alaska. These flights will feature complimentary soft drinks, Starbucks coffee, Northwest wine and microbrews (for passengers 21 and older), and A la Cart planeside baggage service.
"Travelers are going to enjoy our popular pale ale," said Glenn Brady, president of Silver Gulch Brewing and Bottling Co. "It's a really nice beer that has a broad appeal. It's going to enlighten a lot of people on what a craft beer can be, in terms of 'Well I never thought I'd enjoy that, but I did.' "
"The pale ale we serve to customers onboard our Q400 flights will be about as fresh as you can get," said Lisa Luchau, Alaska Airlines' director of onboard food and beverage. "It'll be bottled and packed every day."
Enough about beer and industry trends. Back in January, Alaska Air Group reported a fourth quarter GAAP net profit of $78 million. For the full year, Air Group reported a record adjusted net profit of $383 million compared to $339 million in 2012. Adjusted earnings per share grew by 14% from $4.73 per share in 2012 to $5.40 per share in 2013. Record fourth quarter net income, excluding special items, of $77 million, or $1.10 per diluted share, compared to $50 million, or $0.70 per diluted share in 2012.
These were record fourth quarter results and their 19th consecutive quarterly profit. Pretax margin was 10.2%, a 3-point improvement over 2012. The margin expansion was driven by solid demand during the holiday season, good cost control and by little help from lower fuel prices. ALK achieved a 12.4% pretax margin, a 13.6% return on invested capital and $415 million of free cash flow. These are all records for the company.
With this strong cash flow generation over several years, ALK now has a very strong balance sheet, arguably the strongest balance sheet in the industry. Debt and operating leases are just 35% of their capital structure. With the free cash flow they repurchased 2.5 million shares of their stock. It's worth noting that they've repurchased 21 million shares of stock in the last 7 years. This is clearly a shareholder friendly company.
Alaska Airlines’ pensions are fully funded, which means that the best pilots and flight attendants will think about going to work for these guys. Their customers benefit from low fares because they have low cost. They've lowered their mainline unit cost in 11 of the past 12 years, and costs are now much closer to the low-cost carriers than the legacy airlines. Great customer service at a low cost. This ain’t Spirit Airways. Management will straight up tell you that they believe they're going to have strong free cash flow, and they don't have any other alternatives but to return that cash flow to shareholders based on what we're seeing today.
The company believes that there's more that they can do out of Seattle and Portland. If you look at their service out of Seattle and Portland today, they have really high market shares in North-South markets but not nearly as high market shares in East-West markets, so the Midcon to the East Coast is where they have room to apply their muscle. They really want to be known as the airline that has really good service and low fares. If they can do this, they’ll have a legacy of sustainable cash flows for years.
Some other notable accomplishments:
· Ranked as the best U.S. major airline by The Wall Street Journal's "Middle Seat" scorecard.
· Named Airline Industry Leader in the 2013 Temkin Customer Service Rankings.
· Held the top spot in U.S. Department of Transportation on-time performance among major U.S. airlines for the 12 months ended November 2013.
· Alaska Airlines received the FAA's "Diamond Certificate of Excellence" award for the 12th consecutive year; and Horizon Air received the certificate for the 12th time in the last 14 years.
· Improved employee productivity in 2013 by 4.0% compared to 2012.
· Signed five-year collective bargaining agreements with Alaska pilots and Horizon flight attendants.
· Named most fuel-efficient airline in the U.S. in a report released by the International Council on Clean Transportation.
· Signed an exclusive multi-year partnership with Seattle Seahawks quarterback, Russell Wilson, and named him our "Chief Football Officer."
At the end of the day, I have to say the ANAL-ysts aren’t paying much attention to this airline in the great Northwest. $$$MR. MARKET$$$ projects earnings in 2014 of $8.44/share which, at the existing PE of 13, should generate a share price of $8.44 x 13 = $109.72, which is past my sell target.
Just to prove how much I love the airlines, I am writing up this report at 39,000 feet and have emailed you all from my airplane seat. The guy next to me is sleeping and I want to put my laptop away so I can start pounding some beers. I am flying United and all they have is siss beer. I want to fly Alaskan so I can have craft beers.
Here’s what the CEO Brad Tilden had to say about his airline:
“These core advantages give us optimism for 2014 and beyond. With our 13,000 employees working together every day to win new customers and keep the ones we have and with the revenue initiatives announced in 2013, we believe we have the right tools in place to produce another excellent year in 2014. I want to close by thanking talented and dedicated folks at Alaska and Horizon for operating safely and on time and for providing exceptional customer service.
Solid execution by our outstanding people led us to our best year ever," CEO Brad Tilden said. "We're proud of our record profitability and of the record bonus of more than a month's pay that each of our people will receive next month. And we're grateful to our customers for their loyalty. We know that in this highly competitive industry, we must earn their business every day, every flight."
That’s all I have to say about this other than pass me another siss beer. I’ll be drinking Johnny Walker Blue soon with the quatloops I make on ALK.
I am HUGE!
$$$MR. MARKET$$$
Although it had been occupied for thousands of years by indigenous peoples, from the 18th century onward, European powers considered the territory of Alaska ripe for exploitation. The United States purchased Alaska from Russia on March 30, 1867, for $7.2 million ($121 million adjusted for inflation) at approximately two cents per acre. The area went through several administrative changes before becoming organized as a territory on May 11, 1912. It was admitted as the 49th state of the U.S. on January 3, 1959.
The name "Alaska" had been introduced in the Russian colonial period, when it was used to refer to the peninsula. It was derived from an Aleut idiom, which figuratively refers to the mainland of Alaska. Literally, it means object to which the action of the sea is directed. It is also known as Alyeska, the "great land", an Aleut word derived from the same root.
One can see there are a lot of great things associated with Alaska. Every now and then some perhaps questionable products are derived from there as well.
But never mind all that, if you haven’t been to Alaska, maybe it’s time for you to check it out. It stays light out forever in the summer so if it’s Vitamin D you are looking for, think about taking a trip. How do you get there? I thought you’d never ask. How about Alaska Airlines. I love Alaska Airlines. In fact I love it so much, I bought the stock.
Today I bought stock in Alaska Airlines (ALK) at 92.74. I will sell it in 4 – 6 weeks at 107.39. Here’s why I like ALK:
It starts with a mighty good chart. Not unlike an airplane taking off to Alaska.
The stock is up 61% in the last 52 weeks, yet its PE is only around 13. Even better, it pays a 1% dividend, so your money isn’t sleepy when you invest it. The global aviation industry holds a steady outlook for 2014 as solid economic recovery and rising cargo demand lend optimism to the sector. The outlook is particularly favorable for the U.S. economy, with GDP growth expected to materially improve from the pace of the last few years. With the world’s largest economy improving, North American airlines look brighter for 2014. Consolidation benefits, growing travel demand and a number of new and enhanced ancillary revenues also provide impetus. The U.S. airline industry is expected to remain profitable over the next two decades given the improving worldwide economic activity. An uptick in economic activity will fuel demand for airline service. Passenger enplanement is expected to grow 0.8% to 745.5 million in 2014 and about 2.1% in the future, reaching $1.03 billion by 2028 and nearly $1.15 billion by 2034. Airlines still trade at healthy discounts to the market given their abysmal historical track record, but that was before the excess capital was shaken out of the market and before all of these mega mergers which has eliminated cut throat price wars.
The FAA projects air traffic, customarily measured in billions of revenue passenger miles (implying a unit of one mile flown by one passenger), to grow many folds over the same period. Revenue passenger miles will jump from 822.2 billion reported in 2012 to almost 1.47 trillion by 2034 at an average annual rate of 2.7%.
Now that we have established that the industry is on solid footing, what about Alaska Airlines? ALK won their sixth consecutive J.D. Power award for highest in customer satisfaction among traditional network airlines. This is one of the most respected measures of customer service in the industry. Recent media results indicate that they have improved even further in the last 6 months.
Let’s ask the customers:
“Alaska Airlines has everything you want from an airline. Cheap airfares, good service aboard and at the airport and clean planes. They even give you a snack and a beverage! No delays or lost baggage. What a pleasure to fly with Alaska!”
“Alaska Airlines is by far my favorite airline to fly. They consistently have good service, are generally on-time or EARLY! and they really do care about their employees and it shows. They have updated their gates in Seattle and most of their west coast airports to have "Power at the gate" so you aren't running around searching for an outlet and then sitting on the floor next to it so someone doesn't steal your phone. They are upgrading their planes as often as reasonably possible, and they offer much better seat pitches, fresh food/picnic packs, and electronic use throughout the flight now (since FAA has cleared mobile devices in airplane mode)! I'm not going to say that they are perfect, but for a domestic airline (read no long haul international flights) they are the best bang for your buck.”
“They probably have the best frequent flyer program as far as domestic flights go and they definitely deliver there. With their expansion of flight path offerings I will for sure be flying Alaska for many more years to come!”
“I'm sure there are a lot of people who've had bad run ins with any airline but this is one of the best to deal with. For those of you who don't travel much I'll hear the same complaints about all the airlines, but it's not necessarily a reflection on the company, it may just be the market in general. Moving on...
I've had flight attendants see me in line at Starbucks and ask me where I'm going. We chat a little and he offers to pick up my coffee tab, tells me the flight attendants on my flight are spectacular and to have fun on my trip. No, he was not trying to pick me up, (i'm pretty sure he swung the other way). Fast forward a year, and he recognizes me on another flight but this time he's my flight attendant. He's as great on the plane as he was in the terminal.”
“I've flown about 200,000 miles with Alaska since mid-2006 and I think I can say in all honesty that I've had about 2 bad experiences. Granted I don't check bags unless I'm bringing back wine from Napa Valley, or some other circumstance, but from their advertisements, (get your bag in 25 minutes or get $25) I'd say they do a pretty good job. I've flown many different airlines, NWA, Delta, Hawaiian, United, Frontier, US Airways, Jet Blue, Air France, Korean Air, Asiana, etc. etc. but I'd have to say I favor Alaska. BTW, if you're a MVP or MVP Gold the perks just keep getting better (Free first class upgrades, free checked baggage, lots of frees.... and it's served with a smile)! And just FYI, as an engineer I fly Alaska because they are proudly an all Boeing fleet. I'm trusting my life to these people and I'm not about to fly Airbus unless I have no other options.”
“Any serious flyer can truly appreciate Alaska Airlines. In fact, anyone that lives in the great Pacific Northwest is blessed to have such a great airline in its back yard. Flying is so aggravating these days but Alaska makes it is great as it can. I routinely pay a little more to fly Alaska. It is much more pleasurable than flying CattleCar Airways!.”
“Staff is friendly. Seating area was OK. The standard airport fare with a small exception. Blue glowing light under the seat. It wasn't a flotation device or a bomb. It was a power adapter. As a weary traveler, with my devices uncharged, it was a happy sight indeed. An oasis in the middle of power desert. This review is being typed up while charging
. I'm flying Alaska whenever I can.....or visit their seating area ”“I have to say Alaska Airlines makes American Airlines look like an amateur production. I almost felt like an Alaska employee as I put my own baggage tags on my luggage. In flight service was nice and the seats were comfortable. I selected Alaska for a trip from San Antonio to Seattle because it was non-stop. That's a huge plus in today's travels. I cannot believe how fast they deliver baggage on both sides of the trip. The bags were coming out of the chute before we could walk from the plane. American, Delta, and United should take notes. I'll be on Alaska Airlines when I get the chance.”
Now then, many airline stocks have easily beaten out the S&P 500 in the year-to-date time frame. In fact, several companies have put up gains in excess of 20% to kick-off 2014, shaking off the overall market’s volatility so far this year.
Alaska Air Group has a big operation in Alaska, including a hub in Anchorage. The company also has heavy exposure in the Washington and Oregon with headquarters in Seattle. ALK is also rapidly expanding to other markets. So far so good this year operationally as well. March traffic is up over 4% from last year and their fleet has an 88% on time stat. That’s awesome.
The ANAL-ysts have been bumping up their estimates the past few months, up to $6.92/share for 2014 and to $7.79/share for 2015. We’ll get back to these idiots later in the flight.
ALK scored well on my quant screen which weighted momentum and value among the highest factors. As usual, that is an attractive combination – an investment which poses relatively low risk (on a Debt/EBITDA and EV/EBITDA basis) combined with tremendous price movement (fueled by large inflows from institutional holders—institutional ownership sits at 98.5% versus an industry average of around 75%).
Why all the attention? ALK also capitalizes on one of the highest recent growths in Revenue per Available Seat Mile, the airline industry’s main efficiency metric. The planes are full and on time. They are efficient and ridiculously profitable.
ALK represents a business model with dominant routes (USA-Hawaii, USA-Alaska, and most regional west-coast travel) on which it can build eastward without harming its cash flow margin (which is currently among the highest in the industry). With the recent mega mergers (American/US Air and United / Continental), Delta has been left holding its dick in its hands. So there has been a lot of talk about a merger with Delta which would offer shareholders a significant premium. Just sayin.
Here’s the most compelling reason to love this stock. Travelers on Alaska Airlines flights between Anchorage and Fairbanks and Anchorage and Kodiak will soon enjoy an extra infusion of local flavor in the form of Silver Gulch Brewing & Bottling Co.'s Old 55 Pale Ale.
"Silver Gulch is a successful local business based in the Fairbanks area, and we're excited to offer their beer on our Q400 flights within Alaska," said Marilyn Romano, Alaska Airlines' regional vice president – Alaska. "This continues our tradition of serving products made in the communities we proudly serve."
Passengers will have the opportunity to sample the moderately hopped, American-style pale ale free of charge beginning March 3, when Alaska Airlines introduces the Bombardier Q400 to the state of Alaska. These flights will feature complimentary soft drinks, Starbucks coffee, Northwest wine and microbrews (for passengers 21 and older), and A la Cart planeside baggage service.
"Travelers are going to enjoy our popular pale ale," said Glenn Brady, president of Silver Gulch Brewing and Bottling Co. "It's a really nice beer that has a broad appeal. It's going to enlighten a lot of people on what a craft beer can be, in terms of 'Well I never thought I'd enjoy that, but I did.' "
"The pale ale we serve to customers onboard our Q400 flights will be about as fresh as you can get," said Lisa Luchau, Alaska Airlines' director of onboard food and beverage. "It'll be bottled and packed every day."
Enough about beer and industry trends. Back in January, Alaska Air Group reported a fourth quarter GAAP net profit of $78 million. For the full year, Air Group reported a record adjusted net profit of $383 million compared to $339 million in 2012. Adjusted earnings per share grew by 14% from $4.73 per share in 2012 to $5.40 per share in 2013. Record fourth quarter net income, excluding special items, of $77 million, or $1.10 per diluted share, compared to $50 million, or $0.70 per diluted share in 2012.
These were record fourth quarter results and their 19th consecutive quarterly profit. Pretax margin was 10.2%, a 3-point improvement over 2012. The margin expansion was driven by solid demand during the holiday season, good cost control and by little help from lower fuel prices. ALK achieved a 12.4% pretax margin, a 13.6% return on invested capital and $415 million of free cash flow. These are all records for the company.
With this strong cash flow generation over several years, ALK now has a very strong balance sheet, arguably the strongest balance sheet in the industry. Debt and operating leases are just 35% of their capital structure. With the free cash flow they repurchased 2.5 million shares of their stock. It's worth noting that they've repurchased 21 million shares of stock in the last 7 years. This is clearly a shareholder friendly company.
Alaska Airlines’ pensions are fully funded, which means that the best pilots and flight attendants will think about going to work for these guys. Their customers benefit from low fares because they have low cost. They've lowered their mainline unit cost in 11 of the past 12 years, and costs are now much closer to the low-cost carriers than the legacy airlines. Great customer service at a low cost. This ain’t Spirit Airways. Management will straight up tell you that they believe they're going to have strong free cash flow, and they don't have any other alternatives but to return that cash flow to shareholders based on what we're seeing today.
The company believes that there's more that they can do out of Seattle and Portland. If you look at their service out of Seattle and Portland today, they have really high market shares in North-South markets but not nearly as high market shares in East-West markets, so the Midcon to the East Coast is where they have room to apply their muscle. They really want to be known as the airline that has really good service and low fares. If they can do this, they’ll have a legacy of sustainable cash flows for years.
Some other notable accomplishments:
· Ranked as the best U.S. major airline by The Wall Street Journal's "Middle Seat" scorecard.
· Named Airline Industry Leader in the 2013 Temkin Customer Service Rankings.
· Held the top spot in U.S. Department of Transportation on-time performance among major U.S. airlines for the 12 months ended November 2013.
· Alaska Airlines received the FAA's "Diamond Certificate of Excellence" award for the 12th consecutive year; and Horizon Air received the certificate for the 12th time in the last 14 years.
· Improved employee productivity in 2013 by 4.0% compared to 2012.
· Signed five-year collective bargaining agreements with Alaska pilots and Horizon flight attendants.
· Named most fuel-efficient airline in the U.S. in a report released by the International Council on Clean Transportation.
· Signed an exclusive multi-year partnership with Seattle Seahawks quarterback, Russell Wilson, and named him our "Chief Football Officer."
At the end of the day, I have to say the ANAL-ysts aren’t paying much attention to this airline in the great Northwest. $$$MR. MARKET$$$ projects earnings in 2014 of $8.44/share which, at the existing PE of 13, should generate a share price of $8.44 x 13 = $109.72, which is past my sell target.
Just to prove how much I love the airlines, I am writing up this report at 39,000 feet and have emailed you all from my airplane seat. The guy next to me is sleeping and I want to put my laptop away so I can start pounding some beers. I am flying United and all they have is siss beer. I want to fly Alaskan so I can have craft beers.
Here’s what the CEO Brad Tilden had to say about his airline:
“These core advantages give us optimism for 2014 and beyond. With our 13,000 employees working together every day to win new customers and keep the ones we have and with the revenue initiatives announced in 2013, we believe we have the right tools in place to produce another excellent year in 2014. I want to close by thanking talented and dedicated folks at Alaska and Horizon for operating safely and on time and for providing exceptional customer service.
Solid execution by our outstanding people led us to our best year ever," CEO Brad Tilden said. "We're proud of our record profitability and of the record bonus of more than a month's pay that each of our people will receive next month. And we're grateful to our customers for their loyalty. We know that in this highly competitive industry, we must earn their business every day, every flight."
That’s all I have to say about this other than pass me another siss beer. I’ll be drinking Johnny Walker Blue soon with the quatloops I make on ALK.
I am HUGE!
$$$MR. MARKET$$$
AP
Comment