Alaska Air: The Industry Jewel

The Southwest (NYSE: LUV) plan to buy AirTran (NYSE: AAI) for a 60% premium has pushed up the stock prices of all the small carriers. JetBlue (NASDAQ: JBLU) was up less than 6% at $6.29, which is a disappointment because Barron’s did a positive story on the company. Shares in Republic Airways (NASDAQ: RJET) were up 6% to $8.26.

The one company among the small airlines that rose near to its 52-week high in trading was Alaska Air (NYSE: ALK), which moved up 5% to $50.95.

Alaska Air is considered among the finest run carriers in America. It bested all other traditional airlines in recent JD Power customer service research. Alaska Air’s debt is a very modest $1.5 billion. In the June quarter, the company made $59 million on revenue of $976 million. These cornerstones of financial strength have contributed to the Alaska Air share price performance during the last year. The stock is up 80%. JetBlue shares are flat for the same period

One of the company’s great advantages is its strength in the Western US. This is concentrated from the company’s hub in Seattle, up the coast to Alaska and down the coast into Mexico. Alaska Air also serves Hawaii. It competes very little on the crowded routes that run toward the Midwest and up and down the East Coast, parts of the U.S. crowded by large airlines and aggressive competition for customers.

Alaska’s route system and financial strength make it a likely candidate for a buyout. If it gets the kind of premium AirTran did, the stock will move above $75.

Douglas A. McIntyre