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Airline Stocks’ Post-Earnings Report Cards

Despite recent performance, airlines still face turbulence

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US Airways: B

US Airways LCCUS Airways‘ (NYSE:LCC) blockbuster Q4 and full-year earnings went a long way toward reassuring investors that its bid for bankrupt American Airlines’ parent AMR Corp. (PINK:AAMRQ) is no desperation move.

Earnings more than doubled to $37 million (22 cents a share) on a record $3.3 billion in revenue in the fourth quarter. For the full year, LCC posted the highest annual profit in its history — $637 million ($3.28 a share), compared to $71 million (44 cents a share) a year earlier.

Just like the others, LCC has run hot, up 30% in the past six months. It also has a dirt-cheap PEG of just 0.07. The company ended 2012 with nearly $2.7 billion in cash and has grown annual profit from $111 million in 2011 to $537 million last year.

Even without a deal for American, LCC is doing an impressive job of managing costs and boosting revenue per available seat mile (RASM), a key measurement of profitability. Like the rest of the industry, however, US Airways faces headwinds over fuel costs.

Although LCC has placed modest orders for new aircraft, an AMR merger brings with it more than 500 new, fuel-efficient aircraft over the next decade. I think the odds for a deal have improved in recent weeks, though much of that altitude has been priced in.

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