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Alaska Air Group continues to face investor trepidation as Delta's growth in Seattle continues

Analysis

Even after achieving investment grade status in 2014 - becoming only the second US airline to reach that milestone - Alaska Air Group's valuation still trails its competitors, many of which do not have the financial stability that Alaska has enjoyed for years.

It appears current investor trepidation centres on Alaska's ultimate fate after Delta has aggressively built up Seattle during the last couple of years, adding significant competitive capacity in Alaska's largest hub. Despite Alaska's confidence that it will survive and thrive after Delta's encroachment, investors seem to be taking a wait-and-see attitude with respect to the new competitive dynamics in Seattle.

In the short term, Alaska is still facing unit revenue headwinds both from its own capacity growth and competitive capacity expansion in Seattle, which may be fuelling the cautious approach investors are taking towards the company.

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