Investing in Airline Stocks
Few industries suffered as badly at the hands of coronavirus as aviation, with pandemic era restrictions causing airline stocks to plummet. After enduring the most difficult of circumstances, many airlines have since returned to profitability and, in the last year, demand for travel has been particularly robust.
Yet most airline shares remain well below pre-pandemic levels. Is investing in airlines worth considering? In this article, we will highlight 4 of the top airline stocks to watch.
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Investing in Airlines
After the pandemic caused international travel ground to a halt in 2020, demand rebounded strongly as tourists made up for lost time. Travel demand defied rising prices in 2023, soaring and helping many airlines return to profitability for the first time since before the pandemic.
Demand for air travel has remained strong in 2024 and, as inflation normalises and interest rate cuts become a reality, demand could yet improve. However, despite growing revenue, higher operating costs have had an impact on the bottom line of many airline stocks.
Consequently, operating margins remain significantly lower than pre-pandemic levels, which goes someway to explain why many airlines’ share prices also remain significantly lower than pre-pandemic levels. Margins are anticipated to recover slightly this year, which is also set to see a record number of people travelling.
If you’re considering investing in airlines, it’s important to understand that the industry is highly cyclical, something which is completely outside the control of individual airline stocks. When times are tough, demand for air travel inevitably takes a hit, as holidays are one of the first things to be cut from a budget.
The Top Airline Stocks to Watch
If you’re confident about the long-term prospects of the airline industry, in the following sections, we have highlighted some of the top airline stocks to consider this year.
Delta Air Lines
Delta Air Lines is currently the biggest airline in the world in terms of both revenue and market capitalisation. It has the second largest share of the US domestic market, from which it derives the vast majority of its revenue, and is also a fairly big player internationally.
In 2023, Delta reported record revenue of $58 billion and operating income of $5.5 billion. Particularly positive for Delta is the impressively growing demand for high-margin premium travel and its lucrative collaboration with American Express, which is proving to be a key revenue driver.
After suspending its dividend payment in the face of the coronavirus pandemic, Delta Air Lines resumed its distributions in 2023. At the time of writing, the airline stock has a dividend yield of 1.6%.
United Airlines
United Airlines is another major US airline which was formed in the late 1920s by the consolidation of several airlines, hence the name.
United operates an extensive network of flights, serving more than 330 destinations across five continents. Out of the major US airline stocks, United flies to the most countries, with this large network offering it an advantage over its domestic competition.
In 2023, United’s revenue rose to $54 billion with operating income reported at $4.2 billion.
Southwest Airlines
Southwest Airlines was founded in 1967 and was a pioneer of the no-frills airline model. However, since its inception, it has evolved into one of the largest airline stocks in the US and, indeed, the world. Its share of the US domestic market is only narrowly behind that of Delta and American Airlines.
Of the major US airline stocks, Southwest by far has the most robust balance sheet, boasting a net cash position of $2 billion as of 30 June 2024. For companies which operate in cyclical industries, such as airlines, a strong balance sheet can help weather any storms brought about by a potential downturn.
Prior to 2020, Southwest had paid dividend to shareholders for 25 consecutive years, but was forced to suspend distributions at the outset of the pandemic. Dividends were subsequently resumed in 2023 and, at the time of writing, the airline stock has a dividend yield of 3%.
In the full-year 2023, revenue rose to $26 billion with operating income falling to $267 million.
International Consolidate Airlines
International Consolidated Airlines (IAG) is the largest UK airline stock listed on the London Stock Exchange (LSE).
IAG is an airline holding company which was formed in 2011 following a merger between British Airways and Iberia. Since then, IAG has also added Vueling and Aer Lingus to its portfolio.
In 2023, revenue climbed to €29 billion and operating profit rose more than 170% to €3.5 billion.
How to Buy Airline Stocks
With an Invest.MT5 account from Admiral Markets, you can invest in all the top airline stocks examined in this article and many more! In order to start investing in airline shares, follow these 4 steps:
- Register for an Invest.MT5 account and log in to the Dashboard
- Open the web trading platform
- Search for airlines to invest in and click the symbol to open a price chart
- Create a new order, enter the number of airline shares you wish to purchase and click ‘Buy’ to send your order to the market.
Investing with Admiral Markets
An Invest.MT5 account allows you to purchase over 4,500 individual stocks from some of the world’s largest stock exchanges! In order to learn more and open an account today, click the banner below:
FAQ
Which airline stocks pay dividends?
A number of top airline stocks pay dividends to shareholders, including Delta Air Lines and Southwest Airlines.
What are the big 4 airlines?
The “big four” is a term sometimes used to refer to the four biggest US airlines: Delta Air Lines, Southwest Airlines, United Airlines and American Airlines. Between them, these four airlines account for almost 70% of the domestic US market.
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