Top Airline Stocks to Take Off in 2024

It’s 2024, and the sky is filled with exciting opportunities for investors.

As the airline industry is mounting to new heights, it is also fueled by a rebirth in travel demand and a renewed focus on sustainability. The pandemic may have clipped its wings temporarily, but now the airline sector has proven its resilience, with stocks taking off like never before.

In fact, according to the Airports Council International (ACI), global passenger traffic is projected to reach 83% of pre-pandemic levels in 2024, with a full recovery expected by 2025. This surge in demand is translating into positive news for airline stocks, making them an interesting investment proposition for 2024 and beyond.

Meanwhile, airlines are investing heavily in eco-friendly technologies, from sustainable aviation fuels to more efficient aircraft designs, positioning themselves as trailblazers in the race towards net-zero emissions. This environmental consciousness is not only good for the planet but also for investors seeking long-term growth potential.

With tailwinds like these, choosing the right airline stocks could propel your portfolio to new altitudes.

Through this guide, you’ll learn about the best airline stocks poised for take-off in 2024.

Tie your seat belts, as it’s going to take off!

Understanding Airline Stocks

Before you know about the top contenders, let us help you gain a solid understanding of the airline stock world.

Airline stocks represent ownership in companies providing passenger and cargo air transportation services. Various factors, including economic conditions, fuel prices, labor costs, and consumer demand for travel, typically influence these stocks.

While the industry has faced challenges, such as the grounding of the Boeing 737 MAX and the impact of the COVID-19 pandemic, airline stocks are now showing great resilience and potential for growth.

Here’s a breakdown of the key players and the factors that influence their flight path:

• Legacy Carriers: These established airlines (e.g., Delta Air Lines (DAL), American Airlines (AAL), United Airlines (UAL)) boast extensive route networks, brand recognition, and frequent flyer programs. They typically offer premium services and cater to both business and leisure travelers.
• Low-Cost Carriers (LCCs): These budget airlines (e.g., Southwest Airlines (LUV), Spirit Airlines (SAVE), Frontier Group Holdings (ULCC)) focus on offering lower fares with a no-frills approach. They often operate on a point-to-point model, focusing on leisure travel.
• Regional Airlines: These smaller carriers act as feeders for major airlines, connecting smaller cities to major hubs. They often operate under a franchise agreement with a larger carrier.

Benefits of Investing in Airline Stocks

Now, you must be thinking about whether to invest in airline stocks or not.

Investing in airline stocks can be an exciting and rewarding opportunity for investors seeking to diversify their portfolios and capitalize on the growth potential of the aviation industry.

While the airline sector is known for its cyclical nature and sensitivity to external factors, it offers unique advantages that savvy investors can leverage.

• Exposure to Global Economic Growth

The airline industry is naturally tied to the global economy’s health. As the economy expands and consumer confidence rises, demand for air travel tends to increase, driving higher revenues for airlines.

By investing in airline stocks, investors gain exposure to the broader economic growth, potentially allowing them to benefit from the upswing in travel demand. This correlation with economic cycles can provide opportunities for long-term capital appreciation.

• Dividend Income Potential

While not all airlines offer dividends, several well-established carriers with stable cash flows and profitability have historically paid dividends to their shareholders. Dividend-paying airline stocks can be an attractive option for income-seeking investors, providing a regular passive income stream.

Additionally, companies with a strong track record of dividend payments may signal financial stability and a commitment to rewarding shareholders.

• Contrarian Investment Opportunities

The airline industry is notorious for its volatility, often driven by fuel price fluctuations, labor disputes, and geopolitical events. This volatility can create opportunities for contrarian investors willing to go against the prevailing market sentiment.

During periods of industry downturns or negative news, airline stocks may experience significant price drops, presenting potential buying opportunities for investors with a long-term perspective.

By carefully analyzing the fundamentals and growth prospects, contrarian investors can potentially purchase undervalued airline stocks and benefit from their eventual recovery.

• Portfolio Diversification

Diversification is a core principle of sound investment strategy, and airline stocks can play a valuable role in achieving a well-diversified portfolio.

The airline industry operates within the broader transportation sector, which can exhibit different performance patterns than other sectors, such as technology, healthcare, or consumer goods.

By including airline stocks in their portfolios, investors can reduce their overall risk exposure and potentially enhance their overall returns through diversification.

• Exposure to Technological Advancements

The aviation industry is continuously evolving, driven by technological advancements that aim to improve efficiency, reduce costs, and enhance the passenger experience.

Airlines that embrace innovation and invest in modern aircraft, sustainable fuel technologies, and digitalization can potentially gain a competitive edge, leading to improved profitability and growth prospects. Investors in airline stocks can indirectly benefit from these technological advancements and their potential for long-term growth.

Potential Risks Related to Airline Stocks

 

As you have read above, investing in airline stocks can offer compelling growth opportunities and portfolio diversification benefits, so investors must be aware of the inherent risks associated with this industry.

The aviation sector is known for its cyclical nature and sensitivity to external factors, which can significantly impact the performance of airline stocks. Therefore, understanding these risks is essential for making informed investment decisions and managing expectations.

• Cyclical Nature of the Industry

The airline industry is highly cyclical and closely tied to broader economic conditions. During economic expansion, demand for air travel tends to surge, leading to increased revenues and profitability for airlines.

However, when economies experience downturns or recessions, consumer spending on discretionary activities like travel often declines, putting pressure on airline revenues and profitability. This cyclicality can lead to significant fluctuations in airline stock prices, potentially exposing investors to substantial volatility.

• Fuel Price Volatility

Fuel expenses represent a significant portion of an airline’s operating costs. The price of jet fuel is heavily influenced by global oil prices, which can be subject to fluctuations driven by geopolitical tensions, supply and demand imbalances, and other macroeconomic factors.

A sustained increase in fuel prices can significantly erode an airline’s profit margins, potentially impacting its financial performance and stock valuation. Conversely, a decline in fuel prices can provide a tailwind for airline profitability, positively affecting stock prices.

• Regulatory and Safety Concerns

The airline industry is heavily regulated to ensure passenger safety and security. Airlines must comply with strict regulations governing aircraft maintenance, pilot training, and operational procedures.

Any major safety incident or accident can severely damage an airline’s reputation, leading to a loss of consumer confidence and potentially triggering costly investigations, fines, or legal liabilities.

Additionally, changes in regulations or introducing new safety standards can require significant capital investments, impacting an airline’s financial performance.

• Intense Competition

The airline industry is highly competitive, with numerous carriers vying for market share on both domestic and international routes. Price wars and aggressive marketing campaigns are common as airlines strive to attract customers and fill seats.

This intense competition can pressure ticket prices and profit margins, potentially impacting airlines’ financial performance and stock valuations.

Moreover, consolidation through mergers and acquisitions can reshape the competitive landscape, creating uncertainties and potential disruptions.

• Labor Disputes and Operational Disruptions

Airlines rely heavily on skilled labor, including pilots, flight attendants, and ground crew. Labor disputes, strikes, or work stoppages can significantly disrupt operations, leading to flight cancellations, delays, and customer dissatisfaction.

These disruptions can directly impact an airline’s revenue and profitability, potentially affecting its stock performance.

Additionally, adverse weather conditions, natural disasters, or other unforeseen events can cause operational disruptions, further compounding the risks airlines face.

So, when investing in airline stocks, remember they carry risks.

However, you must carefully evaluate individual airline companies’ financials and growth strategies to identify opportunities to capitalize on the benefits of investing in this dynamic sector.

The Top Contenders: Best Airline Stocks to Consider!

So, investors, now that you have a good understanding of airline stocks, the benefits of investing in them, and potential risks. 

Let’s jump into the list of Best Airline Stocks you can consider when investing.

Let’s begin:

• Delta Air Lines (DAL)

• Current Market Capitalization: $27.1 Billion

Delta Air Lines (DAL) emerges as an enticing airline stock with its $27.1 billion market cap and impressive 8.9% year-to-date performance as of 12 March 2024. Operating a massive 1,250 aircraft fleet across 280 global destinations, Delta caters to business and leisure travelers, solidifying its reputation through world-class service.

Notably, Wall Street analysts are overwhelmingly bullish, issuing seven “strong buy” and eleven “buy” recommendations, including a top rating from Morgan Stanley. This optimism stems from Delta’s robust 19% projected revenue growth and innovative sustainability initiatives like sustainable aviation fuels and eco-friendly aircraft.

With a diversified revenue base, strong financials, and a customer-centric approach, Delta Airlines’ stock forecast shows that it is a compelling investment in the resurging airline sector, offering exposure to its continued ascent.

• Ryanair Holdings (RYAAY)

• Current Market Capitalization: $25.0 Billion

Ryanair Holdings (RYAAY) is an attractive budget airline stock for investors. As of March 2024, this Irish low-cost carrier has a market cap of $25.0 billion and an impressive 44.3% year-to-date stock performance.

Ryanair’s success comes from its rock-bottom fares and efficient point-to-point model catering to cost-conscious travelers.

However, its reliance on discretionary leisure travel makes it vulnerable during economic downturns when disposable incomes shrink. Fuel costs also directly impact profitability for this lean operator. Despite risks, Ryanair’s powerful brand, cost-effective $638,500 revenue per employee, and aggressive expansion plans across its 500 aircraft fleet covering 220 airports make it compelling. Its 95% load factor in June 2023 highlights robust demand. 

With a forward P/E of 12.6 and a 1.33% dividend yield, Ryanair presents an enticing but cyclical investment option in the budget airline space that warrants scrutiny of economic and fuel factors.

• Southwest Airlines (LUV)

• Current Market Capitalization: $20.7 Billion

Southwest Airlines (LUV) overcame disruptions in late 2022 to become an interesting airline stock for investors. As of March 2024, Southwest has a market cap of $20.7 billion and a forward P/E ratio of 14.3.

While its 1-year return of 3.9% lags peers, Southwest boasts a strong balance sheet with a debt-to-asset ratio under 0.3. The airline generates $348,780 in revenue per employee and pays a dividend yield of 2.50%.

Southwest flew 817 aircraft, achieving an 80% load factor in 2023. After posting record Q1 2023 revenues, the company raised Q2 forecasts on robust travel demand.

Overcoming disruptions, Southwest continues affordable fares and award-winning hospitality across 121 airports. With 47 consecutive profitable years and a sustainability plan targeting net zero emissions by 2050, Southwest presents a compelling value airline investment if its recovery maintains momentum.

• United Airlines Holdings (UAL)

• Current Market Capitalization: $14.4 Billion

United Airlines Holdings (UAL) offers investors exposure to one of the major U.S. carriers. As of March 2024, United has a market cap of $14.4 billion and trades at an attractive forward P/E of 3.8, though its 1-year return of -17% lags the industry.

With a fleet of around 1,400 aircraft, United generates $520,010 in revenue per employee. However, it carries a higher debt-to-asset ratio of around 0.5. United faced disruptions during peak 2023 travel periods due to overwhelming demand outpacing capacity. This highlights the strong travel rebound but exposed operational constraints.

Positively, United posted a record $3 billion+ operating cash flow in Q1 2023, with revenues up 51% year-over-year. As it navigates industry headwinds like fuel costs and labor shortages, United’s massive scale offers opportunities from the projected multi-year upswing in air travel demand.

• American Airlines Group (AAL)

• Current Market Capitalization: $9.7 Billion

American Airlines Group (AAL) has a market capitalization of $9.7 billion and a forward P/E ratio of 4.5. Its stock experienced a 1-year return of -9.2%. Despite this negative return, AAL’s earnings projections for fiscal 2023 are set to reach $2.95 per share, nearly six times higher than the previous year’s figure. While sales growth is not as dramatic, profitability is the key focus.

AAL’s debt-to-assets ratio is over 0.6, but its improved earnings suggest the potential for long-term growth. The airline recently announced its largest-ever plan for tropical travel during the winter months, indicating its commitment to expansion and capitalizing on strong travel demand.

American Airlines stock price today is $13.90, down 0.43% in pre-market trading. AAL presents an opportunity to consider as its improved profitability aligns with the industry’s uptrend.

• Alaska Air Group (ALK)

• Current Market Capitalization: $4.7 Billion

Alaska Air Group (ALK) has a market capitalization of $4.7 billion and a forward P/E ratio of 6.1. The stock experienced a 1-year return of -23.7%. Despite this negative return, ALK continues aggressively expanding into new markets, including adding international service to the Caribbean and direct routes from Portland to Miami and Palm Springs to New York.

The airline is consistently ranked among the top carriers for reliability and customer satisfaction, winning the 2022 Global Airline of the Year award from Air Transport World. ALK has five “strong buy” or equivalent ratings from major Wall Street analysts, including an “overweight” rating from Morgan Stanley.

Additionally, ALK has a relatively low debt-to-asset ratio of less than 0.3, making it one of the better-positioned stocks in terms of debt. ALK presents an opportunity in the airline industry with a current stock price of $38.61, up 3.35% in regular trading.

Alaska Air Group (ALK) is consistently ranked among the top carriers for reliability and customer satisfaction, winning the 2022 Global Airline of the Year award from Air Transport World.

• JetBlue Airways (JBLU)

• Current Market Capitalization: $2.4 Billion

JetBlue Airways (JBLU) has a market capitalization of $2.4 billion and experienced a 1-year return of -13.6%. While its forward P/E ratio is unavailable, the airline recently made headlines for being ordered to unwind its partnership with American Airlines over certain routes due to an ongoing mega-merger deal with Spirit Airlines.

This merger, aimed at generating $700 million in cost savings and growth potential, comes at an opportune time as air travel picks up. Despite the setback, JetBlue continues to expand, offering services across the U.S., Caribbean, Latin America, Canada, and Europe with a fleet equipped with in-flight entertainment and Wi-Fi.

With a current stock price of $6.94, down 0.14% in pre-market trading, JBLU presents an opportunity to consider the airline industry amidst its merger and expansion efforts.

Well, the list doesn’t end here. There are many of the best airline stocks to buy, such as Spirit Airlines INC stock, Copa Holdings (CPA), Allegiant Travel (ALGT), SkyWest (SKYW), and more.

Key Tips to Find the Best Airlines Stocks To Buy!

Now it’s time for some bonus tips from our ABBO News experts that will help you with the best airline stocks to buy:

• Prioritize Profitability: Focus on airlines generating strong profits and having healthy net income growth. Look for companies with a low debt-to-EBITDA ratio, as the airline industry often carries high debt loads due to substantial capital expenditures.
• Stay Updated on Industry Developments: The airline sector is highly sensitive to crashes, near-misses, and the opening or closing of lucrative routes. Keep an eye on industry news and developments that could significantly impact an airline’s revenue and stock performance. Additionally, monitor jet fuel prices, as fluctuations can greatly affect an airline’s bottom line.
• Assess Labor Relations: The airline industry is heavily unionized, and labor disputes or strikes can severely disrupt operations and profitability. Favor airlines with a track record of good relations with their unions and those that are not currently negotiating new contracts, as this can minimize potential labor-related disruptions.

Conclusion!

So, wasn’t the sky of airline stocks big? Well, we know it is!

The airline industry offers exciting investment opportunities in 2024 and beyond as travel demand rebounds and airlines prioritize sustainability.

It’s our advice to focus more on profitability, monitoring industry developments, and assessing labor relations. 

With this, as a savvy investor, you can identify promising airline stocks to invest in.