Alaska Airlines (ALK) works as a perfect counterbalance to the price of oil; it’s probably one of the best airlines in the business. Talk to anyone from Seattle, and they’ll swear by them. Management knows how volatile the environment is, and is keeping a hoard of cash in the bank.

Alaska Airlines is the only game in town for the major cities in the “Last Frontier State,” and has a monopoly on several routes. In addition, they fly to Hawaii and Mexico.

Remember when Sarah Palin said that the only 2 foreign countries she’d ever visited were Canada and Mexico? Alaska Airlines was probably offering a special on trips to Cabo San Lucas. I’m sure Governor Palin learned much about the diplomatic community on the trip.

The company keeps $1.3 billion in cash and short-term investments. The stock trades at $30, and has a book value of $25. Not subtracting liabilities, it has over $29 a share in cash. Pretty solid for an airline.

As people watched oil drop down into the $30 range, airlines have done quite nicely. Jim Rogers, the famous hedge-fund manager, is starting his own EFT holding the major US airlines. This could be a small boost for the industry. Over the last year, the stock has outperformed the S&P 500 by 60%.

In December, with all the extreme winter weather, Alaska had to cancel over 500 flights. With weather improving, the stock has risen, and its overall traffic fell 5.2% for the month of December. For 2008, overall traffic rose 1.4%, to $18.71 billion.

Its competition is pretty anemic. Warren Buffett once said the entire return on the airline industry was about 0%. This is probably true, as some companies have gone bankrupt more than once. However, Southwest Airlines (LUV) had the best stock return of any publicly traded company over a long period of time.

Alaska Airlines is a solid company that will do well no matter the price of oil does, or where the economy goes. Its management keeps a conservative balance sheet to see it through good times and bad, and it could be a good way to play a drop in oil for a short-term trade.