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Airline Stocks: 2 to Book, 2 to Bump

Some airline stocks will keep soaring, but others will run out of fuel

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Bump: American Airlines (AAL)

american-airlines-aal-stockThe new American Airlines (AAL) has arrived, rewarding Doug Parker’s high-stakes courtship with the honor of running the largest carrier. But what’s in store for this behemoth among airline stocks?

AAL has hit the ground running on its integration plan, announcing this week that American and US Airways have extended their codeshares to most flights across their combined global network. By the end of the first quarter, the airlines each expect to sell tickets on flights operated by the other carrier using its own code and flight number.

This kind of integration is always a benefit because it’s easier for passengers to select and combine flights operated by each airline on a single itinerary. That said, count on passenger grumbles, particularly as passengers come to terms with US Air’s exit from the Star Alliance at the end of March.

While American’s OneWorld Alliance eventually will be a boon to frequent flyers, expect some frustration when US Air frequent flyers can no longer use their miles on Lufthansa, United Continental or other Star Alliance member carriers.

The merged US Air-American is a force to be reckoned with, but honeymoons are notoriously short when it comes to airline mega-marriages. Although AAL’s valuation is cheaper than rival airline stocks with a forward P/E of just 6.5, I think the new AAL has flown as high as it can for now.

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities. 

Article printed from InvestorPlace Media,

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