Seattle (TheStreet) -- Delta (DAL - Get Report), the world's third-biggest airline, is intruding on Alaska's (ALK - Get Report) Seattle hub, but so far neither Alaska nor investors nor analysts seem particularly worried.

Rather, analysts have been ratcheting up expectations for Alaska, one of four airlines that will report earnings on Thursday. Alaska split its stock two-for-one on July 10.

Before Delta began planning its Seattle buildup in 2013, its executives talked with Alaska about changes in the two carrier's code-share agreement. Those talks did not go well.

Boeing 747 Fades Out But Lufthansa Flies a Fresh One to JFK

Five Worst U.S. Airlines of All Time

United Should Close Dulles Hub, Analyst Says, as He Cuts Rating

Sources familiar with the negotiations between Alaska and Delta said that Delta didn't  want Alaska to code share with Delta competitors in international markets.

Delta's intent was to secure more favorable pricing for seats on Alaska flights and to assure seats were available for its code-share passengers, said one source, who added: "Delta wanted favorable pricing and better access to seats including group seats."

Delta argued that the sale of code-share seats to its international competitors drove up the prorated price it paid for seats.

Alaska argued that, even if it wanted to, it could not alter code-share arrangements with existing partners. Delta is believed to have argued that Alaska could terminate those arrangements early.

Now, the sources said, Alaska is awaiting the end of its code-share with Delta in about two years. But in the meantime, on flights where the carriers do not compete, both continue to benefit from the arrangement

"We remain open to finding ways to work with our long-time partner Delta," said Alaska spokeswoman Bobbie Egan. She declined to comment on the negotiations. Delta declined to comment.

Delta, which began the year with 38 daily Seattle departures, now has 95 and shows no signs of slowing down.

For its part, Alaska remains defiant, as well as profitable. Analysts have high expectations for Alaska, which benefits from its domestic focus at a time when international traffic -- particularly Delta's international traffic -- shows signs of weakening.

Alaska shares closed Friday at $48.73; the stock is up 33% year to date. Delta shares closed Friday at $37.18, up 35% year to date.

Alaska's stock split prompted a round of analyst reviews. CRT Capital Group analyst Mike Derchin increased quarterly estimates and raised his target price to $57, noting that shares are trading at a discount to the industry average. "We believe a re-rating the stock is reasonable for an airline with investment grade balance sheet, among the highest pretax margins in the industry, strong free cash flows, and following a balanced capital deployment plan, including share buyback and dividend," Derchin wrote.

Meanwhile, Wolfe Research analyst Hunter Keay rates Alaska outperform with a $65 target price, while UBS analyst Darryl Genovesi ranks Delta as his top pick among U.S. airlines. followed by Alaska and Southwest (LUV).

Imperial Capital analyst Bob McAdoo also boosted his estimates following the stock split, and raised his target price to $58 with an outperform rating.

"While some investors and reporters continue to voice concerns over Delta's increased presence in Seattle, it appears to us that to-date impact has been minimal," McAdoo wrote in a July 15 report. "Alaska should continue to execute near the top end of the peer group."

McAdoo wrote that in June, Delta has 212 more Seattle flights per week than it did a year earlier. However, the majority of the recently added routes are being flown with 76 regional jets, rather than more efficient mainline jets, McAdoo said. "Despite added capacity, the strong unit revenue of Delta's mainline business suggests that additional competition from Delta is not having a material impact," he said.

In the second quarter, Alaska passenger revenue per available seat mile rose 4% from the same quarter a year earlier.

Judging by the times of its domestic added flights, Delta seems most interested in supporting its new international flights, McAdoo said. For instance, Delta's Beijing-Seattle flights arrives at 5:16 a.m. Between 6 a.m. and 6:15 a.m., Alaska flights depart Seattle bound for Las Vegas, Los Angeles, San Diego, San Francisco and San Jose. McAdoo said passengers arriving from Beijing would probably not have time to make the Alaska departures, so Delta has scheduled flights to the same destinations between 6:40 a.m. and 7:05 a.m.

Additionally, Delta has scheduled four domestic Seattle arrivals between 1:13 p.m. and 1:50 p.m., timed to enable connections with flights to Hong Kong, Shanghai and Tokyo between 2:21 p.m. and 3:01 p.m. Only two Alaska arrivals would allow for convenient connections, he said.

McAdoo noted that Alaska fills more than 88% of the seats on its flights serving Los Angeles, San Francisco, San Diego and San Jose, the four largest California markets where Delta has recently added service. "This suggests that very few Delta international passengers could be accommodated on Alaska's flights to the West Coast," he said.

TheStreet Ratings team rates ALASKA AIR GROUP INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation: 

"We rate ALASKA AIR GROUP INC (ALK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, revenue growth, notable return on equity and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 164.70% and other important driving factors, this stock has surged by 70.35% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ALK should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • ALASKA AIR GROUP INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, ALASKA AIR GROUP INC increased its bottom line by earning $3.59 versus $2.19 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $3.59).
  • The revenue growth significantly trails the industry average of 43.2%. Since the same quarter one year prior, revenues slightly increased by 7.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Airlines industry and the overall market, ALASKA AIR GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to $242.00 million or 14.15% when compared to the same quarter last year. Despite an increase in cash flow of 14.15%, ALASKA AIR GROUP INC is still growing at a significantly lower rate than the industry average of 64.78%.

Written by Ted Reed in Charlotte, N.C. 

To contact this writer, click here.

Follow @tedreednc

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.