Despite major airlines' efforts to consolidate their way to greater efficiency, low-cost carriers could still be the sector's best investments. In the U.S., these smaller companies, typically with lower cost structures, are taking market share from the major carriers, thanks largely to rising demand for short-haul flying within the U.S.

These companies should make for good investments, given a favorable operating climate over the next several years. Take a look.

A unique operating model
Atlas Air Worldwide ( NASDAQ: AAWW ) derived 45% of its quarterly revenue from its ACMI division, which provides outsourced-cargo-aircraft-operating solutions. Another 23% was contributed by AMC Charter, a unit contracted with the U.S. Military Air Mobility Command for cargo and passenger services. Atlas also operates a commercial charter business, catering to brokers, cruise ships, freight forwarders, direct shippers, and airlines (29% of the total). The remaining 3% stemmed from dry leasing and other segments.

Atlas is achieving solid growth in its core ACMI business, thanks to the addition of Boeing 747-8 aircraft to its fleet during 2012 and this year. Along with the increased business related to the 747-8s, Atlas is also increasing its 767 service with DHL.

The company may well continue to expand its 747-8 fleet, as it holds rights to purchase another 13, and this would bring the total to 22 747-8s. Along the lines of long-term expansion, it intends to grow its CMI operation, which includes the outsourcing of passenger-aircraft services.

I like Atlas' long-term prospects because it seems poised to continue to transition away from the military services business, toward consumer operations. The stock's trailing P/E of 9.8 is below the industry average of 15.4.

Aggressive expansion
JetBlue Airways ( NASDAQ: JBLU ) , predominantly a passenger air carrier, is historically a provider of services on the East Coast and between New York and California. In recent years, it has substantially expanded beyond departures from New York's JFK airport and Long Beach, California, with Boston and the Caribbean becoming major operating spots. In fact, this year, JetBlue plans to increase seating capacity between 5.5% and 7.5%, and the bulk of the new flights will be from those regions.

Indeed, it is now the largest airline in Boston by a large margin, and 27% of its 2012 capacity was in the Caribbean (including Puerto Rico). The result has been improved pricing, as measured in revenue-per-available-seat-mile or RASM, a factor that is supporting higher profitability. Specifically, JetBlue's RASM rose to 11.35 in 2012, up from 10.96 the prior year.

Based on the persistence of this trend as well as aircraft purchases that will allow for additional expansion, JetBlue's long-term outlook is solid. The shares are worth a look at this time.

Growing leisure carrier
Allegiant Travel ( NASDAQ: ALGT ) distinguishes itself by focusing on low-frequency flights between leisure destinations without connection flights. It maintains a low average airfare, partly by charging fees for items that other airlines include in the price. Moreover, it offers customers secondary products, such as hotel reservations, rental cars, show tickets, nightclub packages, and other offerings.

In this way, Allegiant has been growing its proportion of ancillary revenue to the total significantly. As of the second quarter, 65% of the total was from passenger service, 34% from ancillary fees and items, and 1% from fixed-fee contracts and other sources.

Growth is being spurred primarily by the addition of capacity, with a modest contribution from same-store markets. This year it intends to lift available seat miles, a measure found by multiplying the number of seats in the air by the number of miles flown over a specified period, 7% to 11% year over year.

Given its stable balance sheet relative to the broader industry ( see its Financial Strength ratios ), Allegiant ought to have the resources for the ongoing expansion of services.

A West Coast powerhouse
Alaska Air ( NYSE: ALK ) derived 71% of its quarterly revenue from mainline (longer-haul) flying, and another 15% from regional services. The remaining 14% was contributed by freight and mail and other sources.

The carrier has been increasing its available capacity in the 8% range year over year, by way of new routes out of Anchorage, Portland, San Diego, and Seattle to destinations throughout the Western U.S. and Hawaii.

Passenger traffic has increased in tandem with the expansion of seating. This improvement is further evidence that the leisure-flying market has legs. Certainly, Alaska is impressive in terms of its return on investment, both for the trailing 12 months and historically. ( See its Management Effectiveness .)

I expect this airline to remain at the forefront of the leisure-travel industry. As such, the shares look compelling.

Coming back strong
Spirit Airlines ( NASDAQ: SAVE ) is expanding faster than any of the previously mentioned airlines, with available seat miles up 21% in the June quarter. It is building its presence across the U.S., adding both long and short haul routes throughout the 52 states.

This carrier emerged in 2011 when it launched an initial public offering. It has been expanding while also achieving much-improved margin's thanks to fuel and maintenance-cost containment.

Spirit derived 59% of its quarterly revenue from passenger flying. Like Allegiant, it attributes a large percentage, 41%, to non-ticket sources.

The carrier boasts a clean balance sheet, with no long-term debt and well-above-average margins for the industry ( see its ratios ). Why are its margins so unusually high? In part, because it keeps costs contained. Moreover, Spirit has been known for very-low airfares on newly introduced routes that are then ramped up once volumes climb. It does, report an ascending load factor (occupancy rate).

All told, Spirit's strategy is sound and it should continue to perform well over the long term.

Conclusion
The upturn in low-cost, short-haul flying, that began a number of years ago with Southwest Airlines , appears to be persisting strongly. Leisure flying between domestic points is apt to increase in the years ahead. Airlines mentioned in this posting are some of the best investments for those looking to capitalize on this trend.

Among the five carriers discussed, Alaska Air appears to be the best investment at this juncture. but any of the airlines would make a good addition to your long-term portfolio.