Jim Cramer tends to think of airlines as a group that trades together in lockstep; either they all thrive or all struggle together. But this earnings season has completely flipped that notion on its head.
As the market enters the third week of earnings season, all of the major U.S. based airlines have reported. Somehow Southwest Airlines is crushing it, while Delta is doing OK, and American Airlines and United Continental are in hot water.
"A rising tide lifts all ships, but once the tide goes out, that is when you find out who the real winners are. And in the airline space, Southwest is the undisputed champion," the "Mad Money" host said.
The curious thing about airline quarters is that they cannot be judged merely by headline numbers. The key metric that matters most are not revenues or earnings, it is something called PRASM: passenger revenue per available season mile.
PRASM is the crucial gauge of efficiency that measures how much money the airline has made from each seat on its flight.
With PRASM in view, it was clear that the first quarter was not-so-hot for the entire industry. But it was worse for some than others. American PRASM fell by 7.5 percent, United Continental was down 7.4 percent and Delta was down 4.6 percent.
Southwest did the best out of the bunch, with a PRASM decline of 3.6 percent. Even though the environment was difficult, Southwest managed to stay more efficient than its peers.
Read more from Mad Money with Jim Cramer
Cramer attributed some of Southwest's strength to the fact that it is primarily a domestic airline without many flights going overseas. Other major airlines had significant international exposure, and given the strength of the dollar that hurt the bottom line.
"There is another major reason for Southwest's consistent outperformance, and that is the company's superior cost structure," Cramer said.
Excluding fuel, Southwest has a dramatically lower cost per available seat mile, or CASM.
To really understand why Cramer considers Southwest to be best-of-breed, he said to look no further than Texas. The state has suffered dramatically from the prolonged weakness in oil.
Yet, Southwest Chief Commercial Officer Bob Jordan confirmed that both Houston and Midland look fantastic, even though they are the two most oil-dependent cities in Texas. This was in contrast to United Continental, which said Houston was a major source of weakness in its quarter.
"The airlines are cheap because people worry that their earnings estimates will need to be slashed going forward, but I don't think that is the case with Southwest, and I would be a buyer of the stock into any weakness," Cramer said.
Ultimately, Cramer crowned the winner as Southwest, with Delta in not-so-close second, and American and United Continental in the end.
"You want to own best-of-breed, which is why you want Southwest," Cramer said.