I was looking at some airline stocks this morning, and it struck me how completely lopsided the sector's market caps are.
Take a look at the major carriers' RPM rank versus their market capitalization. I've included some of the smaller carriers too...
These are December RPMs:
American - 9 billion RPMs - $3.8billion market cap
United - 8.2 billion RPMs - $818million market cap
Delta - 7.1 billion RPMs - $3.5billion market cap
Northwest - 5.3 billion RPMs - $1.4billion market cap
Continental - 4.5 billion RPMs - $1.6billion market cap
Southwest - 3.5 billion RPMs - $13.5 billion market cap
US Airways - 3.0 billion RPMs - $358million market cap
America West - 1.3 billion RPMs - $126million market cap
Alaska - 990 million RPMs - $791million market cap
ATA - 685 million RPMs - $151million market cap
AirTran - 375 million RPMs - $457million market cap
Frontier - 348 million RPMs - $517million market cap
Vanguard - 94 million RPMs - $22million market cap
Look at Southwest! $13.5 billion! That's not a typo...
My question is this: Certainly United doesn't deserve a market cap parallel to that of Delta or Continental considering their cost structures. But is it really that low? Is Southwest that high?
If you were buying an airline, would you really consider Frontier and AirTran worth more than USAirways?
Is Alaska really worth twice of what US is, even though they have less than a third of the traffic that US does?
Remember that market cap is a rough estimate of what wall street values a company at - assets and debts.
Now, I know that profitability is a key here, and the airlines that are consistently profitable are rewarded and the others are punished, and that makes this argument pretty academic. But, does Southwest really warrant that kind of market cap?