The airline industry returned to profitability last year after an historic loss of $140 billion during the pandemic. Now that air travel is booming, the future for airline stocks appears bright.
The demand for air travel is expected to double by 2040, growing at an annual average rate of 3.4% to about 8 billion passengers from the pre-pandemic level of 4 billion, lifting profits at airlines, according to the International Air Transport Association (IATA). It projects the airline industry’s net profit will reach $25.7 billion in 2024, from $23.3 billion in 2023.
In this article, we have selected the stocks of 10 airlines that are thriving, and are priced quite reasonably, particularly if airlines continue to rebound. Take a look at out top airline stock picks below:
Best Airline Stocks to Invest in 2024
A Closer Look at the Best Airline Stocks in 2024
Now, let’s take an in-depth look at the best airline stocks:
1. Copa Holdings – Best Airline Stocks Bargain
Copa is a leading airline in Latin America, through its subsidiaries, Copa Airlines and AeroRepública. Air travel is expected to grow in that region due to rising disposable income and increased urbanization. Copa offers roughly 327 daily flights among 78 destinations in 32 countries in North, Central and South America and the Caribbean from its Panama City hub.
Copa said it had earnings per share (EPS) of $16.79 in 2023, up from $8.26 in 2022. Revenue for the year was $3.46 billion, up 16.7%. Revenue per available seat mile (RASM) also improved by 3% to 12.5.
Copa raised its quarterly dividend by 96% this year to $1.61. Considering the company’s revenue and EPS growth over the past three years, there’s a strong likelihood the dividend could increase, with the payout ratio being only about 20%. The stock appears undervalued compared to its peers as it is trading at under eight times earnings.
| Ticker | One-year price change: | Dividend Yield | P/E |
| NYSE: CPA | 3.19% | 6.58% | 7.59 |
2. International Airlines Group – Leisure Travel Lifts Earnings
Strong international longhaul travel demand, particularly on routes across the Atlantic, helped drive what is shaping up to be a record 2023 for International Airlines Group. Most of the rise is due to leisure travel, but corporate travel is beginning to pick up as well, after plummeting during the COVID-19 pandemic. Load factor, the percentage of available seats that were filled, in the third quarter was 88.9%.
In its fourth-quarter and full-year 2023 earnings report published on Feb. 29, IAG said it had yearly revenue of €29.5billion ($37.5 billion), compared to €23.07 billion in 2022.
Annual operating profit rose €3.5 billion, compared to €1.28 billion in 2022. IAG also trimmed €1.14 billion from its net debt, trimming its net debt to EBITDA to 1.7 from 3.1. The gains were due to strong leisure travel, with Aer Lingus and British Airways leading the way.
| Ticker | One-year price change: | Dividend Yield | P/E |
| OTC: ICAGY | -3.10% | N/A | 3.27 |
3. Delta Airlines – Solid Performance, Yet Underpriced
Delta has more than 4,000 daily flights, delivering more than 200 million passengers annually to 280 locations across six continents. It was the first large U.S. airline to negotiate a new deal with its pilots since the pandemic began when it agreed to 34% raises over the next three years last March.
Delta had $58 billion in 2023 revenue, up 14.7%, while net income jumped 252% to $4.6 billion. The company is forecasting first-quarter revenue growth of 2.5% to 4.5% compared to the same period last year, which was below expectations. The company said it expects double-digit revenue growth this year.
The company spent $879 million last year to pay down its adjusted net debt and after cutting its dividend completely in late 2020, just brought it back last year at $0.10 per share. Considering the strong year, trading at below six times earrings, Delta is priced below many of its competitors.
| Ticker | One-year price change: | Dividend Yield | P/E |
| NYSE: DAL | 8.09% | 0.96 | 5.8 |
4. American Airlines – Positioned for Greater Profitability
American offers an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries. It is doing well in completion factor (the percentage of flights that were not canceled) as well as its on-time departures and that performance showed in its finances.
In fiscal 2023, it had a record $53 billion in revenue, up 7%. Yearly EPS grew from $0.19 in 2022 to $1.21. The company carries a lot of debt, with a debt-to-equity ratio of -6.325, but it reduced its debt by $3.25 billion in 2023.
Despite higher fuel prices in 2023 (the average cost per gallon of jet fuel for U.S. airlines in 2023 was $2.97, which is 50% higher than the 2022 average of $1.98). American grew its RASM by 2% to 17.47. It has a relatively young fleet, so its repair costs are down compared to other airlines.
| Ticker | One-year price change: | Dividend Yield | P/E |
| NASDAQ: AAL | -10.70% | N/A | 11.94 |
5. Ryanair – Increasing Revenue, Earnings, Despite Headwinds
Ryanair focuses more on passenger volume to make up for its lower-margin fares. It has 3,600 daily flights to 235 cities in 37 countries, most of them of the short-hop variety. It showed growing traffic, year-on-year, in each of the past 12 months. Its load factor was 89% in January, which though down from 91% in the same month in 2023, is above-industry averages.
Nine-month revenue totaled €11.27 billion ($12.2 billion), up 26%, year over year while EPS rose to €1.92, up 48.8% from the same period a year ago.
Boeing’s problems could slow Ryanair’s growth. Ryanair has 136 Boeing 737 Max 8-200s in its fleet of 574 aircraft and hopes to have an additional 174 737 Max 8 by the summer. However, the airline downgraded its original forecast of 205 million fliers in 2024 to 200 million, citing production and delivery delays for the Max 8.
Ryanair began paying a regular quarterly dividend for the first time this year, with it initially being €0.175 per share.
| Ticker | One-year price change: | Dividend Yield | P/E |
| NASDAQ: RYAAY | 41.29% | 1.34% | 14.19 |
6. Air France-KLM – Higher Projections Drive Stock
The company’s improved performance and long-term estimates have excited investors. It said it expects to improve core profit by €2 billion ($2.2 billion) within five years. The company is renewing its fleet and says that 64% of its fleet will be next-generation planes by 2028. It’s less affected by Boeing’s problems as it’s on track to be the world’s largest operator of A350s, which are made by Airbus.
Nine-month revenue was €22.6 billion, up 17.4%, year over year and net income of €1.19 billion, up 24.2% over the same period last year. It also paid down debt, so now its debt-to-EBITDA level is 1.1, instead of 1.8, after the first nine months of 2022.
Despite the progress the company is making, its share price doesn’t appear to have caught up with its earnings, as it is trading at less than two times earnings, well below the industry average of around 10.
| Ticker | One-year price change: | Dividend Yield | P/E |
| OTC: AFLYY | -43.83% | N/A | 0.45 |
7. Sun Country – Rising Revenue and Profitability
The small-cap airline’s strength is its flexibility. Its focus on leisure travel, charter service and cargo flights allows it to use its 680 pilots wherever they are needed the most. Its charter service is steady, with 76% of its clients – which include the NCAA and professional sports, Casino, VIP, and U.S. military – under long-term contracts.
The airline business often goes in boom-or-bust cycles, but Sun Country has been able to maintain adjusted EBITDA margins above industry norms.
In fiscal 2023, Sun Country had record revenue of $1.0 billion, up 17.3%, and EPS of $1.23, up 324%.
The company is growing but doing so in a prudent manner. It just announced it was adding two new routes from Minneapolis, Minn., to Monterey, Calif., and a flight from Minneapolis to Manchester-Boston Regional Airport in New Hampshire. That means it now serves 122 routes at 108 airports in the U.S., Mexico, Central America, Canada and the Caribbean. Sun Country doesn’t offer a dividend but thanks to a solid year, did $68.6 million in share repurchases in 2023.
| Ticker | One-year price change: | Dividend Yield | P/E |
| NASDAQ: SNCY | -28.67% | N/A | 12.01 |
8. Southwest Airlines – Keeping Staff, Customers Happy Helps Bottom Line
Southwest Airlines flies to 121 airports across 11 countries, serving more than 126 million passengers a year. The company was able to avoid service interruptions when its pilots gave the OK to a new contract in January and it recently agreed to a tentative five-year deal with the Transport Workers Union. It has never had to lay off or furlough workers on a wide scale. The company has significantly bounced back from its pandemic lows.
In 2023, the company had $26 billion in revenue, up 9.6%, while EPS fell 6.9% to $0.81 thanks mainly to higher fuel prices. RASM fell 4.5% to 15.32. It had a strong fourth quarter, though, with revenue growing 10.5%, year over year to $6.82 billion.
Southwest said it expects 2024 fuel costs to range around $2.55 to $2.65 per gallon, down from about $3 per gallon in the fourth quarter and $2.89 per gallon for fiscal 2023. With the drop in fuel prices, it said it expects first-quarter RASM to rise between 2.5% to 4.5%, based on 10% capacity growth. Southwest last raised its quarterly dividend to $0.18 in 2019. The only problem with the stock is it appears to be overpriced for the moment compared to its peers.
| Ticker | One-year price change: | Dividend Yield | P/E |
| NYSE: LUV | 0.86% | 2.11% | 46.91 |
9. Lufthansa Group – Progress Across the Board for Airline Stock
Lufthansa is increasing its number of flights and is seeing increased profitability. The area that it’s seeing its biggest growth, though, is its maintenance, repair and overhaul (MRO) segment, which through subsidiary Lufthansa Technik, specializes in MRO for other airlines. All of its passenger airlines increased adjusted earnings before interest and taxes (EBIT) in the third quarter and through nine months in comparison to the prior year.
Nine-month revenue at the Lufthansa Group rose by 18% year over year to €26.7 billion ($28.9 billion) while net income was €1.6 billion, up 232% over the same period last year. Despite that progress, Lufthansa’s shares trade below five times earnings.
The stock may be dragged down in the interim by short-term factors. On Feb. 27, the German labor union Verdi called for a three-day strike of the group, urging that Lufthansa’s employees at Lufthansa Technik, Lufthansa Aviation Training and Lufthansa Technical Training take part in the strike. The company also is in the process of shaking up its board, with CFO Remco Steenbergen expected to step down by the end of June.
| Ticker | One-year price change: | Dividend Yield | P/E |
| OTC: DLAKY | -14.74% | N/A | 4.38 |
10. Japan Airlines – Strong Rebound from Pandemic Lulls
Japan Airlines flies to 376 airports in 64 countries. It returned to profitability in 2022 after some lean years during the pandemic and in 2023, is well ahead of 2022’s pace.
It had nine-month revenue of JPY 1.249 trillion ($9.3 billion), up 124.2% and net income of JPY 85.8 billion yen, up 526% over the same period last year. The company has been expanding the number of flights for its low-cost carrier, Zipair, and that seems to be paying off with Zipair growing the number of passengers by 271% through nine months.
Its shares have dropped lately because of bad news that ultimately shouldn’t hurt the stock much. The tragic January collision at Tokyo’s Haneda Airport between a Japan Airlines Airbus A350-900 and a Japan Coast Guard bombardier DHC8-300 that resulted in five deaths to the bombardier crew, had no financial impact as the airline was covered by insurance.
| Ticker | One-year price change: | Dividend Yield | P/E |
| OTC: JAPSY | -8.1% | 1.55% | 10.75 |
How to Find the Best Airlines Stocks
Focus on Profitability
That advice sounds simple, but it’s hardly that when it comes to the airline industry. The capital expenditures connected with running an airline mean that too many of them have too much debt on their balance sheets. So, look for companies that are seeing strong net income growth and have a low debt-to-EBITDA level.
Follow Industry News
A plane crash, or a near-air collision can easily send an airline stock into a tailspin. At the same time, airlines that open lucrative new routes can see huge revenue gains. A key thing to watch is the price of jet fuel. Rising fuel prices impacts airlines across the board.
Check the Labor Situation Out
The airline industry is heavily unionized and a strike can wreak havoc on a company’s bottom line. Look for companies that have generally had good relations with their unions and are not currently negotiating new contracts.
Where to Get Airline Stock Tips and Insights
AltIndex, a subscription-based service that uses alternative data and artificial intelligence (AI) to rate stocks is a good place to find and rate airline stocks. AltIndex updates its data throughout the day.
Begin with the company’s ranking of best airline stocks. The list updates every half hour and also provides real-time updates on share prices. The list uses an AI score, taken from several datasets, to show which stocks are likely to make a big move and what is propelling that move. AltIndex includes web searches, customer satisfaction ratings, social media, and app downloads, to help it analyze a company.
AltIndex takes that information to compare similar stocks, using AI to find investment insights. Stocks are scored from 1 to 100, simplifying selections for investors.
AltIndex has more than 10,000 members and provides more than 100,000 stock insights and alerts each day and has a strong win rate of 75% from its AI stock picks.
You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well many other useful features.
Conclusion
Airline stocks have always been tricky. Warren Buffett likes to denigrate the industry, saying that “it has been a deathtrap for investors ever since Orville (Wright) took off.” There’s a great deal of price competition in the industry and it’s labor intensive. Though his holding company Berkshire Hathaway, has owned airline stocks in the past, he doesn’t own any now.
However, it may be time to change the common wisdom regarding airline stocks because the industry has shifted since the pandemic. The introduction of artificial intelligence will help airlines boost efficiency, predict weather conditions that could cause flight disruptions, create more stable pricing, and boost fuel management, one of the biggest costs for airlines.
The airline industry is returning to pre-pandemic traffic and revenue levels, but the share prices of some of the better-performing airlines don’t reflect that shift yet. There are bargains out there among airline stocks that could pay off handily for long-term investors.
References
https://www.iata.org/en/pressroom/2023-releases/2023-12-06-01/
https://www.jdpower.com/business/press-releases/2023-north-america-airline-satisfaction-study
https://www.sec.gov/Archives/edgar/data/1067983/000095012324002518/xslForm13F_X02/30197.xml
