In 2015 year-to-date (or YTD), stocks of all top regional carriers except JetBlue have tumbled. JetBlue (JBLU) stock has gained ~47% YTD in 2015. Other regional carriers like Southwest (LUV) lost 11%, while Spirit Airlines (SAVE) lost 33.5%, and Virgin America (VA) lost 25%.
For a longer period of five years, investors have seen gains in all of the above-mentioned stocks. SAVE was the highest gainer with 343% as of September 4, 2015, while JBLU came in second with 283%. LUV was not far behind with 223.5%, while VA gained just 10%.
The iShares Transportation Average ETF (IYT), which invests ~16.85% of its holdings in airline stocks, lost ~14% YTD. For the longer period of five years, IYT gained 78%.
In this series, we will compare the regional carriers across various parameters to find out how these companies compare to each other. Regional carriers in the US (SPY) are better known as “low cost carriers,” and they operate on shorter routes across the nation. They focus on short distance, non-stop flights called the point-to-point model instead of the spoke and hub model that many legacy carriers use. The low cost carriers gained ground after the airline deregulation in the country in 1978. Though regional carriers operate inside the nation’s boundaries, a few players like Southwest (LUV) are rapidly expanding internationally.
Let’s start by analyzing the revenue model of these regional carriers.