Why Frontier Still Appeals

Enthusiastic workers get you off on the right foot with this mover and shaker.
Author:
Publish date:

Last Friday we

suggested

Mesa Airlines

(MESA) - Get Report

was positioned to be the next up-and-coming airline mover and shaker. And apparently when Wing Tips speaks, people listen: Mesa shares are up a healthy 10% since the market's close last Thursday.

So today, in response to popular demand, we revisit a familiar Wing Tips mover and shaker,

Frontier Airlines

(FRNT)

.

Many of you probably saw the article about Frontier yesterday in

The Wall Street Journal

. Nothing in there that Wing Tips readers didn't already know, but the column did produce a spike in Frontier shares, sending the stock up 3% to close at 16 9/16 on over three times average volume.

Wild West
Frontier Airlines shares lift off over the past year

Source: BigCharts

First, no, I don't regret

suggesting to readers earlier this spring when the stock hit 9 and change that they might want to sell, take some profits and be happy. A good number of readers had gotten in when the stock was at 3 and change, and hey, my personal investing philosophy is, take a healthy profit and bank it. As I said, that is my personal strategy.

And, as I said at the time, if you wanted to continue in the game, you could always just turn around and buy the shares back. And many of you, according to your emails, apparently did just that. And many more thought I had lost my mind and stayed in the stock, period.

Turning Point

So, now we are at another turning point of sorts for the airline. How come? Those spectacular year-over-year operating improvements will now start to come back to earth, as the airline, beginning with the next quarter and certainly the one after that, will be comparing apples to apples, so to speak. No more horrendous bleeding in the year-ago periods because of

Western Pacific

being in the mix.

As a result, earnings are going to be strong for this quarter. I am pretty certain about this, but just remember that after this quarter, we should not see the big bump-ups, year over year, that we've seen this past year.

Also, and this is something I think we need to factor in as well, there are a good number of employee stock options that are floating around at Frontier. These options will become exercisable in the next six weeks or so. So, I ask you: If you were an employee who had options to buy shares at $1.75 or even -- my gosh -- $3, do you think you might exercise them?

I'd say the answer is probably yes. So, we might see a dip in the stock as employees in the next month or so take advantage of their newfound bounty.

Institutions Are Noticing

On the positive side, the stock is finally beginning to generate more institutional interest. First, the stock is now traded on the

Nasdaq National Market

, which has helped. And secondly, Jim Parker, whom we like to call "Mr. Regional Aviation" -- he was for years the primary airline analyst at

Robinson-Humphrey

-- just started coverage of Frontier at his new environs,

SunTrust Equitable Securities

, with a buy rating.

And how about as far as overall management and strategy are concerned? Nothing has changed. We still like the airline a lot, and just had an opportunity to fly them recently. I found the flight attendants and gate agents very helpful and friendly. And I know it sounds corny, but especially with the flight attendants you had that

Southwest

-like

(LUV) - Get Report

feeling that they really did enjoy their jobs. It was a pleasant change to be on a flight where you really felt the crew was genuinely enthusiastic about what they do.

We like to think of such behavior as an incalculable advantage.

So, in review, we still like Frontier as a mover and a shaker. We just don't expect the stock to appreciate as explosively as it has in the last year. For the year, the stock is now up 226%; for the quarter, it's up a hefty 60%.

Tomorrow, we'll update our take on

World Airways

(WLDA)

, the daytrader's favorite airline, which has posted a 75% increase on the quarter.

Holly Hegeman, based in Dallas, pilots the Wing Tips column for TheStreet.com. At time of publication, Hegeman held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. You can usually find Hegeman, publisher of PlaneBusiness Banter, buzzing around her airline industry Web site at

www.planebusiness.com. While she cannot provide investment advice or recommendations, she welcomes your feedback at

hhegeman@planebusiness.com.