On Nov 20, 2013, we maintained our Neutral recommendation on
Delta Airlines Inc.
) based on various strategic measures like route launches,
introduction of ancillary products, strong customer service and
revamping of fleet structure. However, slow economic recovery, a
weak cargo business and competitive threats rising out of
industry consolidation remain our concerns. The passenger airline
holds a Zacks Rank #2 (Buy).
Why Kept at Neutral?
We expect Delta to generate higher revenues on better service
offering, capacity discipline, cost control measures and
customer-focused initiatives. Good customer service and
operational efficiency are expected to fuel corporate customer
growth as business travelers seek quality service.
Delta will benefit from its recent strategic tie-up with
Virgin Atlantic, which will start its journey from the summer of
2014. The Delta-Virgin Atlantic alliance will give additional
frequent quality travel options to trans-Atlantic flyers and will
promote competition in the U.S. and U.K. markets.
Delta continues to add ancillary products and services, and
has introduced full flatbed seats on long haul flights as well as
Wi-Fi across its fleet to attract corporate customers. The
company also continues to expand its operational base through the
introduction of services connecting various domestic and
Nevertheless, the global airline industry continues to face
challenges from the effects of a worldwide economic slowdown that
is expected to persist in the balance of 2013. Additionally, yen
depreciation and weak freight demand continue to affect the cargo
Competition remains a serious threat to Delta's growth and
will only increase once
US Airways Group Inc.
) and American Airlines Inc, a subsidiary of AMR Corporation
merge. Recently, they got the approval to merge and the combined
entity will have more pricing power and control over a larger
number of slots, thus creating a bigger rival for Delta.
Other stocks that are worth considering within this sector are
Spirit Airline Inc.
Alaska Air Group Inc.
). SAVE currently holds a Zacks Rank #1 (Strong Buy), while ALK
carries a Zacks Rank #2.
ALASKA AIR GRP (ALK): Free Stock Analysis
DELTA AIR LINES (DAL): Free Stock Analysis
US AIRWAYS GRP (LCC): Free Stock Analysis
SPIRIT AIRLINES (SAVE): Free Stock Analysis
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