An interesting dynamic is developing in the airline industry which will drive future stock market performance. In a nutshell, high-cost, legacy operators are losing share to nimble, low-cost providers.
“Legacy players have consistently lost share,” says Hedgeye Industrials analyst Jay Van Sciver in a recent institutional conference call. In particular, the highest cost players, like United Continental (UAL), have a real problem. “They are basically ceding share to keep pricing high,” Van Sciver says.
One possible way to play this trend? Get long Spirit Airlines (SAVE). “What’s important is that they’ve grown market share in this exponential way while also expanding margins. That is a good model,” Van Sciver says. “If you can take share, grow quickly, and expand margins, that suggests you have something figured out.”
Watch the video above with Van Sciver where he discusses this evolving market trend.
