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LA City Council OKs Delta's $1.9B LAX Modernization Plans

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Good news flowed in at the Atlanta, GA-based Delta Air Lines (DAL - Free Report) regarding its efforts to modernize its terminals at the Los Angeles International Airport (LAX). The airline behemoth’s lease and license agreement to relocate to terminals 2 and 3 from terminals 5 and 6 at the airport received approval from Los Angeles City Council. The carrier plans to invest $1.9 billion for the upgradation purpose. The agreement aims at expanding Delta’s gates at this key hub.

The sanction marks a huge step toward fulfilling Delta’s aim to upgrade its facilities at the busy airport where it has grown considerably over the years. An extent of its growth at LAX can be measured from the fact that departures (on a daily basis) are currently in excess of 175 compared to 70 in 2009. By relocating to terminals 2 and 3, Delta aspires to carve out “a premier space” for its operations at the busy airport along with its partners in the airline space like Virgin Atlantic and Virgin Australia.

The $1.9 billion plan has already gained authorization from Los Angeles World Airports’ Board of Airport Commissioners. The City Council’s approval has removed a big hurdle as far as the materialization of Delta’s plan is concerned.

An environmental impact review process will now take place. In the event of Delta succeeding in its efforts to modernize its LAX operations, passengers will be the greatest benefactors and it will pave the way for Delta in becoming a dominant carrier at LAX.. In fact, Delta is not the only carrier looking to expand at LAX. Earlier this year, American Airlines Group (AAL - Free Report) had announced its expansion plans at LAX.

Apart from Delta and American Airlines, almost all major US carriers including United Continental Holdings (UAL - Free Report) operate at LAX.  Consequently, we expect investor focus to remain on updates regarding Delta’s efforts to beat the competition and become a dominant player at LAX.

We note that carriers are making huge investments for infrastructural developments driven by cheap oil. Soft oil prices have resulted in huge savings for carriers thereby improving their financial status tremendously.

Zacks Rank & A Key Pick

Delta Air Lines carries a Zacks Rank #5 (Strong Sell). A better-ranked stock in the airline space is Copa Holdings (CPA - Free Report) with a Zacks Rank #2 (Buy).

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