Airline's weak stock flies in the face of its earnings.

• Author: Williams, C.C.
• Position: Midway Airlines Corp.

Business is soaring for Midway Airlines Corp. (MDWY-NASDAQ). The Durham-based carrier is the nation's second-most-profitable and has had 10 straight quarters in the black. It is aggressively expanding its fleet and routes.

So why has its stock lost altitude? After reaching nearly $22 a year ago, its shares sank below $10. Sure, it swooned with other airline stocks last fall and took another hit after saying its second-quarter earnings wouldn't meet analysts' estimates because of unexpectedly large costs. But the main culprit is new competition. In June, Dallas-based Southwest Airlines Co., a low-cost carrier, came to Midway's home, Raleigh-Durham International Airport. USAirways Group Inc.'s low-cost MetroJet unit came to RDU in February.

"This is proving time," says Mark Coleman, Midway's senior vice president of marketing. "There will be some impact, but we can grow through [it]." Investors are skeptical, so Midway's stock is cheap: At $10.25 at the end of June, it was trading at less than six times 1998 earnings of $1.75 per share.

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