Stock prices at airlines

I’ve long noticed that Alaska Airlines has maintained an exceptionally high stock price relative to other airlines.  As I write this, Alaska is at about $51 / share while Delta is at about $18 / share.

I honestly do not know Alaska’s strategy for stock prices.  This is an airline that does a good job on itself and despite it’s legacy airline roots and relatively high costs, it turns a profit very well.  That in itself helps with the share prices.

Yet, I can’t help but keep wondering if Alaska’s high share prices have given it shareholders who tend to invest for a longer view than the typical airline investor.  I wonder if it has enough breathing space to make the right decisions and hence the reason it performs so well financially.

United Airlines stock price is pretty high right now at $30 / share but I actually don’t know why.  It’s not an airline that has so far shown itself to be capable of benefiting from its merger.  I suspect that investors in United are simply hoping that good news will miraculously appear one day soon.

All airline share prices are up but it is curious to me that Alaska has performed so well.  It’s worthy of debate and investigation.

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4 Responses to “Stock prices at airlines”

  1. Ajax, I’m a follower of your blog. Not sure if I misunderstood your post, but I don’t think you can reach such a conclusion based on stock price.

    The stock price alone does not mean anything, and cannot be compared between companies. Alaska Airlines has 70m shares outstanding, whereas Delta Airlines has 850m shares outstanding. So each “stock” of Alaska Airlines represents a much large share of ownership of the company, than it does for Delta.

    A more useful indicator for stock market performance is P/E ratio.

  2. I’m not commenting on market capitalization or P/E ratio. I’m commenting on the psychology of where stock prices take people in terms of wanting a return on investment. Share prices come with a psychology.

    There are many different thoughts on where a stock price should be kept. Some believe that you can realize more market cap if you split your stock and keep the share prices relatively low. Others think that allowing the price of your stock to rise more brings a better investor.

    It is a psychology and no one is ever sure which is right. As someone with an economics background I’m always curious to see where such things go and how it affects a company. Personally, I prefer letting the price rise (a la Apple for instance) and suffering the larger swings in price in return for getting investors who tend to invest for the long haul. I think airlines would thrive better if they were allowed to think, plan and act more for a longer time horizon than the stock market permits most companies to do.

  3. I’d be more interested not in the price per share at any given point so much as the level of stock price over, say, the past five years… How stable has Alaska’s stock been, compared to other airlines?

    -R

  4. Pretty stable with good growth in price over time. They create long term value.

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