Investing in Airline Stocks

Roberto Rivero

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, despite a cost-of-living crisis, air travel demand is robust.

Yet most airline shares remain well below pre-pandemic levels. Is now a good time to invest in airlines? And what are the best airlines to invest in? In this article, we examine 2 top airline stocks and their prospects in 2024!

Why Invest in Airlines?

As we mentioned in the introduction, the airline industry was one of the worst casualties of the coronavirus pandemic in 2020.

With travel restrictions in place for much of the year, planes remained grounded and share prices plunged. However, as travel restrictions began to ease, passenger numbers began creeping up, as holiday makers made up for lost time.

The year 2023 saw strong demand, particularly during summer, with many airlines reporting leisure passenger numbers which have recovered from their pandemic lows. Although, whilst leisure travel has rebounded robustly, business travel is recovering more slowly.

A big positive for airline stocks is jet fuel prices which, after soaring last year, have retreated in recent months and are currently hovering around the same level as before the war in Ukraine.

Jet fuel accounts for a significant proportion of airline operating costs and, consequently, high prices have been a big drag on profitability over the last year. The combination of falling fuel prices and strong passenger demand will be welcome news for investors who hold airline shares in their portfolio.

Risks of Investing in Airlines

Nevertheless, whilst the outlook may look rosier than this time last year, it doesn’t necessarily mean clear skies lie ahead. As the global economy slows and the cost-of-living remains high it is possible this will begin to take its toll on demand for air travel, which is a highly cyclical industry.

Moreover, as mentioned above, whilst leisure travel has rebounded strongly, business travel is lagging. For many airlines, business travel has historically been a very important component of revenue. However, with many businesses opting for virtual conference calls rather than face-to-face meetings, demand has been slow.

The Best Airline Stocks to Watch

So, what are the best airline stocks to buy in 2024? As already noted in the previous section, although falling fuel prices and strong demand are positives for the industry, some risks remain. The highly cyclical nature of airline shares means ongoing economic uncertainty may cause turbulence in the near future.

Furthermore, what constitutes the best airline stocks to buy will differ depend on the individual investor, their investing profile and their goals. However, bearing this in mind, below we will examine 2 top airline stocks to watch in 2024.

Delta Airlines

Delta Airlines is the largest 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.

After suffering during the pandemic, Delta returned to profitability in the second quarter of 2021 but, as with most airlines, is yet to return to pre-pandemic levels of profitability.

In 2022, although revenue was reported 8% higher than in 2019, soaring operating expenses kept operating income suppressed 45% lower than in 2019. 

The more positive outlook surrounding investing in airlines has resulted in Delta’s share price flying 45% higher in the first six months of 2023, making it one of the best performing airline stocks this year. However, despite this impressive growth, share price still remains around 20% lower than pre-pandemic levels.

International Consolidate Airlines Group (IAG)

International Consolidated Airlines Group (IAG) is the biggest UK airline stock listed on the London Stock Exchange (LSE).

It was founded in 2011 after a merger between British Airways and Iberia - the flagship airlines of the UK and Spain respectively. Since its inception, IAG has gone on to acquire four further airlines – BMI, Vueling, Aer Lingus and Air Europa.

IAG was one of the pandemic’s biggest casualties in 2020. Share price dropped more than 65% in a month, whilst annual revenue fell almost 70% and the airline reported a net loss of €6.5 billion.

In order to withstand the downturn in travel, IAG raised more than €2.7 billion in a rights issue, creating almost 3 billion new shares. In the weeks that followed the rights issue, IAG shares dropped to an all-time low.

However, 2022 saw IAG return to profitability and the airline forecast that passenger numbers in 2023 will return to 97% of 2019 levels. These factors, combined with improved sentiment around airline stocks, have contributed to IAG shares performing well of late, gaining 30% in the first six months of 2023. But despite this recent performance, IAG shares remain more than 60% below pre-pandemic levels.

Depicted: Admirals MetaTrader 5International Consolidated Airlines Group Weekly Chart. Date Range: 1 January 2017 – 7 July 2023. Date Captured: 7 July 2023. Past performance is not a reliable indicator of future results.

How to Invest in Airline Stocks

With an Invest.MT5 account from Admirals, you can invest in both of the airline stocks examined in this article. In order to start investing in airline shares, follow these 4 steps:

  • Register for an Invest.MT5 account and log in to the Dashboard
  • Find your account details and click ‘Invest’ to open the Admirals Platform
  • Search for airlines to invest in and open the instrument page
  • Enter the number of airline shares you wish to purchase and click ‘Buy’ to send your order to the market:
Depicted: Admirals Platform – Delta Air Lines Inc. Date Captured: 3 July 2023. Past performance is not a reliable indicator of future results.

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The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
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