Are Airlines Worth Investors' Time?

Tickers in this article: UAL ALK LCC LUV
NEW YORK ( TheStreet) -- Jim Cramer has often said on his "Mad Money" show that he doesn't buy airline stocks. When you look at the track record of most of the big ones, you can see why.

Here's a price chart comparing long-time survivor US Airways Group (LCC) with the world's largest airline by traffic, Chicago-based United Continental Holdings (UAL) .

LCC ChartLCC data by YCharts

United, which not that long ago emerged from bankruptcy, is an airline that hasn't existed very long as a merged entity. UAL took on some heavy debt load and unpaid bills when they merged with Continental Airlines.

The debt load is a lofty $12.45 billion, yet in the company's most recent quarter it reported total cash of $7.7 billion. So as long as operating costs (especially fuel) remains stable and traffic is strong, it may do better next quarter.

At the end of July UAL announced second-quarter earnings results and shareholders felt a bout of airsickness. The equipment-laden air carrier posted a 37% decline in second quarter earnings (year-over-year).

Operating margin and profit margin are as shallow as a drought-stricken pond in Nebraska. Yet, the company has produced almost $37 billion in annual revenue, which equates to $114 in revenue-per-share (trailing 12 months). United's second-quarter revenue rose 1.3% to $9.94 billion.

Executive V.P. and Chief Revenue Officer Jim Compton said UAL's revenue from corporate accounts rose 16% in the second quarter. When asked by The Wall Street Journal if the airline's problems with on-time arrivals, mishandled luggage and flight cancellations would cause lost business, Compton said, "We don't see any loss of market share today and don't anticipate any loss of corporate revenue."

CEO Jeff Smisek, in a July 27 earnings conference call, apologized to the airline's customers for the service flops and problems associated with the Continental merger. "We recognize we added new stress to the system" by implementing too many changes on the same day, he said.

Smisek added that UAL has made "an aggressive effort" to rectify the problems which unleashed a torrent of customer complaints.

US Airways, on the contrary, had a stellar quarter with year-over-year quarterly earnings growth of almost 233%! The year-over-year quarterly revenue growth expanded by over 7%, and its trailing 12-month revenue increased to $13.61 billion.

The airline, like United, has thin profit and operating margins, but its trailing 12-month return on equity ballooned to 157%. The airline has $4.48 billion in total debt and $2.52 billion in total cash.

Comparing UAL to LCC from an investor's standpoint, I'd give US Airways the advantage with its forward PE of only 2.86 and a mysteriously low five-year expected PEG ratio of 0.04. The price-to-sales is also suspiciously low, just 0.12.