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2 Airline Stocks Buckled Up for Passenger Growth in Middle East

As traffic surges in the region, U.S. carriers can use codeshares to stave off competition

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For its part, Emirates has approached American in the past about an alliance — perhaps such talks will move to the front burner once the US Airways integration is further along.

JetBlue (JBLU)

Compared to other airline stocks, low-cost carrier JetBlue (JBLU) seems like a curious choice for investors looking to make a play on Middle East demand growth. Then again, JBLU has made big changes in its business model lately.

JetBlue operates a bilateral code sharing relationship with Dubai-based Emirates Airlines, which is one of the largest airlines in the world. The agreement gives the Middle East airline greater exposure to the U.S. market and boosts JBLU’s exposure to profitable business travelers.

The most notable advantage of this agreement kicked off on Monday when JetBlue launched new service from Detroit to Boston and Emirates launched new service from Boston to the Middle East. Emirates is pulling out all the stops to lure first- and business-class travelers away from legacy competitors: Passengers within 60 miles of Boston’s Logan Airport will be picked up by private car.

Expect this partnership to grow in value to both airlines — particularly since JBLU picked up new gates at Washington D.C.’s Reagan National that were divested after the merger of US Airways and American.

Bottom Line: You can’t rule out Delta Air Lines (DAL), which is a founder of SkyTeam, or United Continental (UAL), a founder of Star Alliance as competitors in this arena. However, United and Delta face a potentially more serious threat from carriers like Emirates as they roll out premium and business-class service from U.S. cities to the Middle East.

“Essentially, these are not airlines; they’re governments,” Delta CEO Richard Anderson told The Wall Street Journal last November. “They have the ability to gain advantages in markets because profitability doesn’t matter.” While the Middle East carriers deny this, U.S. airline stocks are unlikely to win government protection for their business — at least, not anytime soon.

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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