Investing in airline stocks hasn’t been easy for investors ever since the COVID-19 pandemic changed the world forever.
As we head towards the end of 2021, I’m optimistic about a complete travel recovery even though the new COVID-19 variant called Omicron could be an issue in the short term.
What are Airline Stocks?
Airline stocks represent publicly traded shares in companies that operate both domestic and international aircraft services.
In this article, I’ll cover the best airline stocks to invest in as the world attempts to recover from the COVID-19 pandemic.
As countries slowly lessen lockdown restrictions, I expect travelers to eagerly await their next vacation either domestically or abroad. I don’t think the entire travel industry will recover until 2023 or 2024 but that still gives investors a chance to pick up some airline stocks on the cheap.
List of Best Airline Stocks
- Southwest Airlines (NYSE: LUV)
- Delta Airlines (NYSE: DAL)
- United Airlines (NASDAQ: UAL)
- Jetblue (NASDAQ: JBLU)
- Spirit Airlines (NYSE: SAVE)
- Alaska Air (NYSE: ALK)
- American Airlines (NASDAQ: AAL)
Here’s a table with the top Airline stocks by price and market cap:
What are the best airline stocks to buy right now? Here’s a quick rundown of my favorite picks:
1. Southwest Airlines (LUV)
Southwest Airlines is the world’s largest low-cost airline and one of the best-run companies in the industry. LUV stock has one of the best reputations for returning cash to shareholders although the company suspended its dividend due to COVID-19.
In Q3 2021, Southwest generated $4.7 billion in revenue along with an EPS of 73 cents.
Leisure traffic exploded due to pent-up demand while business traffic returned to pre-COVID-19 2019 levels. It’s a step in the right direction but there could be more headwinds in the future as the Delta variant wreaks havoc on the planet.
Southwest held $16 billion in cash on its balance sheet and improved key metrics like ASM & RPM. Average revenue per passenger improved greatly YOY to $136.
Southwest has a good chance of surviving the pandemic chaos although LUV stock has basically traded flat for a whole year.
2. Delta AIrlines (DAL)
Delta airlines is a stock I personally hold in my IRA retirement account because I fly with them all the time. While they aren’t as strong as Southwest, they are one of the more profitable airlines and should survive this mess. DAL stock has taken the biggest beating out of my 3 recommendations, trading around 44% off its 1 -month high. I’m actively buying Delta stock now because I plan to hold the shares for 20+ years.
3. United Airlines (UAL)
United is losing $100 million a day due to the Coronavirus but they hold the most comprehensive fleet in the world. The company has done a lot of things to survive the crisis and should be okay. I prefer LUV or DAL but UAL is my 3rd best choice.
Let’s wait and see how things shake out for the airline industry. I’m going with quality when it comes to airlines that will survive the Coronavirus crisis.
Consider adding any of these stocks to your portfolio since they are well off their 52 week highs.
4. Jetblue (NASDAQ: JBLU)
Jetblue is another low-cost airline stock that should bounce back nicely from the COVID-19 pandemic lows.
In Q3 2021, Jetblue generated $1.8 billion in revenue with an EPS of 40 cents. The company ended the quarter with $3.3 billion on its balance sheet.
5. Spirit Airlines (NYSE: SAVE)
Spirit Airlines is a small discount airline company with the majority of its flights in North America and the Caribbean.
In Q3 2021, the company generated $900+ million in revenue with an EPS of 14 cents.
6. Alaska Air
Alaska Air is one of the largest airlines in the United States by market cap.
In Q3 2021, the company led the industry with a 12% pretax profit margin and did pretty well in terms of rebounding from Q2 2020 during the COVID-19 lockdowns. Alaska Air generated $1.7 billion in revenue with an EPS of $1.52. The company ended the quarter with $3.2 in cash on its balance sheet.
7. American Airlines
How to Invest in Airline Stocks
Here’s how you can invest in shares of airline companies:
Step 1: Find an airline stock
Use the list in this article for choosing which airline stocks to buy. We’ve listed all the publicly traded airline companies in one place for your convenience.
Step 2: Analyze the company
The airline industry is a bit different from other sectors and has its own metrics for determining strong sector performance. I like to take a look at the following factors when comparing airline stocks.
Revenue per seat mile available (RASM)
RASM is a measure of airline profitability and you can use this metric to determine which airline company has the better margins. A company’s seat miles is the number of seats available multiplied by the number of flights flown. Dividing revenue by seat miles equals RASM.
RASM gives us an honest look on how good an airline is at generating a profit per seat. You cannot just use revenue in general because an airline could sell tickets at a discount just to fill seats. RASM shows which airlines does the best job to keeping margins high and maximizing as much revenue as possible.
Step 3: Buy the stock
You need a stock brokerage account to invest in airline stocks. Here are a few of my favorite brokers listed below.
Disclosure: I own zero positions in any of the stocks listed in this article.