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Regional carrier Pinnacle Airlines is in expansion mode, adding some 31 planes to its fleet on the heels of the purchase of Colgan Air earlier this year. Even so, the company still has plenty of cash available for stock buybacks, and Barron's says this could push the airline's shares well above its current price of around $15, which is about 25% below its peak. According to the company's CFO, Peter Hunt, regionals such as Pinnacle can offer major carriers such as Continental, Northwest and Delta smaller-gauge aircraft at a cost structure the majors can't replicate -- such as flying a 50-seat jet for $1,800-$1,900/hr. vs a 125-seat 737 operated by a major at a cost of $3,500-$4,000/hr. "Growing with a regional is a nice strategy," Hunt tells Barron's. The stock trades in line with most regionals at 7 times earnings, though the group has traded as high as 10 times earnings. The company has been aggressively repurchasing stock; while Merrill Lynch believes the stock is worth $19, or 8.6 times its 2008 estimate, one fund manager thinks it could reach as high as $22 if it uses its leverage to buy back stock.

Sources: Barron's
Commentary: 21 Airline Stocks to Keep You Flying High This Summer Pinnacle Airlines To Supplement Growth With Share Repurchase Program
Stocks/ETFs to watch: PNCL, CAL, NWA, DAL, IYT. Competitors: MESA, RJET, SKYW

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Source: Pinnacle Taking Flight - Barron's