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10 Best Airline Stocks to Buy Now

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·12 min read
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In this article, we will be discussing the 10 best airline stocks to buy now. You can skip our detailed analysis of the airline industry, the status of the industry post-COVID-19, and the industry's future outlook, and go directly to the 5 Best Airline Stocks to Buy Now.

The coronavirus pandemic took a huge toll on almost every industry in the world, and the airline industry was no exception. With travel bans in place across the world to prevent the virus from spreading and global stay-at-home and social distancing measures being put in place, suffice it to say no one was thinking of catching any flights to go on vacation. Resultantly, the airline industry took a huge hit, as was seen by its 2020 revenues of $328 billion, an amount that made up only 40% of the revenues from the previous year, as reported by Mckinsey & Company. McKinsey also foresees little growth for the industry in the coming years, with traffic not returning to pre-COVID-19 levels before 2024.

According to Bloomberg, in 2020, air passenger traffic slumped 94% because of the coronavirus pandemic, and governmental aid for the airline sector in the US stood at $220 billion last year, according to the IATA. In their April 2021 update, the IATA mentioned that the airline industry's financial performance will only get worse and more volatile in 2021, in light of new COVID-19 variants surfacing and spreading across the globe, and the fact that vaccination is slow in some parts of the world. The net post-tax losses for the industry were forecasted to be valued at $47.7 billion this year, with an operating margin of -9.4%. The IATA also reported that this weak financial start to 2021 in the passenger business lowered the airline industry's global RPK forecasts to 26% in 2021.

Major airlines operating globally have felt the impact of the coronavirus pandemic, resulting in layoffs and other harsh measures being put in place to keep the companies afloat. Airlines like Delta Air Lines, Inc. (NYSE: DAL), United Airlines Holdings Inc. (NASDAQ: UAL), and American Airlines Group Inc. (NASDAQ: AAL) all laid-off employees because of coronavirus strains. According to Forbes, COVID-19 led to roughly 400,000 airline employees being fired from their jobs as of this February, with United Airlines Holdings Inc. (NASDAQ: UAL) having claimed that about 14,000 additional job losses may come about.

A Great Time to Pile Into Airline Stocks

But all of this presents an attractive entry point for long-term investors as airline stocks are bound to recover amid the mass rollout of vaccines and global economic recovery. Investors have reason to hope that the industry will begin recovering this year. With the growing distribution and injection of COVID-19 vaccines across the globe, we have begun to see the lifting of travel restrictions. For instance, on June 18th, the EU announced that it would be gradually lifting travel restrictions for people entering their domain, particularly US citizens. According to the CDC, COVID-19 cases are also decreasing in the US, and 65.4% of the adults in the country have already received at least one dose of the vaccination. These facts, coupled with US President Joe Biden's previous remarks implying ruling out a nationwide lockdown for US citizens give the industry hope that there may be more citizens allowed to travel if all goes well.

Just like the airline industry, the hedge fund industry is also going through tough times. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

Our Methodology

As such, the airline industry despite being highly volatile and vulnerable particularly because of the COVID-19 pandemic can prove to be a tempting place to invest, depending on the stocks you pick. We have thus compiled a list of the 10 best airline stocks to buy now, keeping in mind hedge fund popularity, past and potential growth, analysts' ratings and gains in the past 6 months and year to date, to pick out the best airline stocks to invest in.

best airline stocks to buy now
best airline stocks to buy now

With this context and industry outlook in mind, let’s start our list of the 10 best airline stocks to buy now.

Best Airline Stocks to Buy Now

10. Azul S.A. (NYSE: AZUL)

Number of Hedge Fund Holders: 11

Azul S.A. (NYSE: AZUL) is a provider of passenger and cargo air transportation services in Brazil. In December 2020, the company operated 700 daily departures to 112 destinations with a fleet of 162 aircraft. The company ranks 10th on our list of the best airline stocks to buy now.

On June 14th, Azul S.A. (NYSE: AZUL) reported that their passenger traffic for May rose by 361.9% year over year, to 1.52 billion RPK. Domestic and international traffic was up 435.5% and 14% year over year respectively. For the first quarter of 2021, the company's EPS was valued at -$1.86 versus estimates of -$1.43, and their revenue was valued at $324.39 million. Azul S.A. (NYSE: AZUL) gained 29.31% in the past 6 months and 30.04% year to date.

By the end of the first quarter of 2021, 11 hedge funds out of the 866 tracked by Insider Monkey for the quarter held stakes in Azul S.A. (NYSE: AZUL). The total value of their stakes was roughly $69.3 million. This is compared to 17 hedge funds holding stakes in the company worth about $160 million. Like Delta Air Lines, Inc. (NYSE: DAL), United Airlines Holdings Inc. (NASDAQ: UAL), and American Airlines Group Inc. (NASDAQ: AAL), Azul S.A. (NYSE: AZUL) is one of the best airline stocks to invest in.

9. Mesa Air Group, Inc. (NASDAQ: MESA)

Number of Hedge Fund Holders: 20

Mesa Air Group, Inc. (NASDAQ: MESA) is the holding company for Mesa Airlines, Inc. The latter is a provider of regional air carrier services with American and United Airlines. As of last year, the company had a fleet of 146 aircraft and 373 daily departures to 102 cities in the US and Mexico. It ranks 9th on our list of the best airline stocks to invest in. On June 8th, Mesa Air Group, Inc. (NASDAQ: MESA) reported 28,264 block hours in the previous month, showcasing a 134% increase year over year in light of more passengers boarding flights to travel because of industry recovery in the aftermath of COVID-19. The company also received a Buy rating from Deutsche Bank in May, with a $15 price target. Mesa Air Group, Inc. (NASDAQ: MESA) reported first-quarter EPS of $0.36 versus estimates of -$0.06, and revenue of $150.37 million. The company also has a gross profit margin of 15.78% and a forward PE ratio of 11.29. The stock gained 42.04% in the past 6 months and 45.41% year to date.

By the end of the first quarter of 2021, 20 hedge funds out of the 866 tracked by Insider Monkey for the quarter held stakes in Mesa Air Group, Inc. (NASDAQ: MESA). The total value of their stakes was roughly $69.6 million. This is compared to 14 hedge funds holding stakes in the company worth about $48.1 million. Like Delta Air Lines, Inc. (NYSE: DAL), United Airlines Holdings Inc. (NASDAQ: UAL), and American Airlines Group Inc. (NASDAQ: AAL), Mesa Air Group, Inc. (NASDAQ: MESA) is one of the best airline stocks to invest in.

8. JetBlue Airways Corporation (NASDAQ: JBLU)

Number of Hedge Fund Holders: 29

JetBlue Airways Corporation (NASDAQ: JBLU) is a provider of air passenger transportation services, and as of December 2020, the company has a fleet of 63 Airbus A321 aircraft, 1 Airbus A220 aircraft, 13 Airbus A321 neo aircraft, 130 Airbus A320 aircraft, and 60 Embraer E190 aircraft. JetBlue Airways Corporation (NASDAQ: JBLU) serves 98 destinations in 30 states in the US and ranks 8th on our list of the best airline stocks to buy now.

On June 9th, JetBlue Airways Corporation (NASDAQ: JBLU) lowered its expected revenue decline from 30% - 35% to 30% - 33%. In the first quarter of 2021, the company's EPS was -$1.48 versus estimates of -$1.66, and its revenue was reported to be $733 million. The stock has also gained 21.56% in the past 6 months and 23.38% year to date.

By the end of the first quarter of 2021, 29 hedge funds out of the 866 tracked by Insider Monkey for the quarter held stakes in JetBlue Airways Corporation (NASDAQ: JBLU). The total value of their stakes was roughly $425 million. This is compared to 29 hedge funds holding stakes in the company worth about $344 million. Like Delta Air Lines, Inc. (NYSE: DAL), United Airlines Holdings Inc. (NASDAQ: UAL), and American Airlines Group Inc. (NASDAQ: AAL), JetBlue Airways Corporation (NASDAQ: JBLU) is one of the best airline stocks to invest in.

7. Spirit Airlines, Inc. (NYSE: SAVE)

Number of Hedge Fund Holders: 24

Spirit Airlines, Inc. (NYSE: SAVE) is an airline service provider operating in 78 destinations in 16 countries. As of December 2020, the company's fleet comprised of 157 Airbus single-aisle aircraft comprising 31 A319ceos, 64 A320ceos, 32 A320neos, and 30 A321ceos. It ranks 7th on our list of the best airline stocks to buy now.

Spirit Airlines, Inc. (NYSE: SAVE) offered a second-quarter outlook on June 15th, saying that it expects adjusted EBITDA margin to be positive in the second quarter, with an 84% load factor, in light of improvements in operating yields. Citigroup has upgraded Spirit Airlines, Inc. (NYSE: SAVE) to Buy after receiving this update, assigning the company a $42 price target. In the first quarter of 2021, the company's EPS was valued at -$2.48 versus estimates of -$2.66, and its revenue was valued at $461.28 million. The stock has gained 30.67% in the past 6 months and 43.76% year to date.

By the end of the first quarter of 2021, 24 hedge funds out of the 866 tracked by Insider Monkey for the quarter held stakes in Spirit Airlines, Inc. (NYSE: SAVE). The total value of their stakes was roughly $250 million. This is compared to 23 hedge funds holding stakes in the company worth about $213 million. Like Delta Air Lines, Inc. (NYSE: DAL), United Airlines Holdings Inc. (NASDAQ: UAL), and American Airlines Group Inc. (NASDAQ: AAL), Spirit Airlines, Inc. (NYSE: SAVE) is one of the best airline stocks to invest in.

6. Allegiant Travel Company (NASDAQ: ALGT)

Number of Hedge Fund Holders: 22

Allegiant Travel Company (NASDAQ: ALGT) is a leisure travel company providing travel services and products to US residents in underserved cities. As of February of this year, the company's fleet consisted of 97 Airbus A320 series aircraft. It ranks 6th on our list of the best airline stocks to buy now.

On June 15th, Allegiant Travel Company (NASDAQ: ALGT) reported that its total system passengers for the month of May grew by 186.4% year over year, and scheduled load factor and total system capacity also increased by 21,400 bps to 68.7% and 86.6% year over year to 1.33 billion, respectively. All the above signals the improvement of the leisure travel sector. In May, the company also brought in $297.5 million through an equity raise. According to the company's first-quarter report, its EPS was -$3.58 versus estimates of -$3.01, while its revenue was $279.12 million. Allegiant Travel Company (NASDAQ: ALGT) gained 11.84% in the past 6 months and 11.51% year to date.

By the end of the first quarter of 2021, 22 hedge funds out of the 866 tracked by Insider Monkey for the quarter held stakes in Allegiant Travel Company (NASDAQ: ALGT). The total value of their stakes was roughly $402 million. This is compared to 19 hedge funds holding stakes in the company worth about $416 million. Like Delta Air Lines, Inc. (NYSE: DAL), United Airlines Holdings Inc. (NASDAQ: UAL), and American Airlines Group Inc. (NASDAQ: AAL), Allegiant Travel Company (NASDAQ: ALGT) is one of the best airline stocks to invest in.

Wasatch Global Investors, an investment management firm, mentioned Allegiant Travel Company (NASDAQ: ALGT) in their first-quarter 2021 investor letter. Here's what they said:

“We recently purchased additional shares of Allegiant Travel Co. (ALGT) not because it’s a play on the economic reopening but because we like the company’s fundamentals and stock price from a risk/reward perspective. Allegiant offers airline flights, hotel bookings, car rentals, travel management and other related services. When the stock price declined in 2020, we performed more research on the company. Although other travel-related companies were facing dire circumstances, Allegiant wasn’t forced to raise dilutive equity or take government money. Since then, Allegiant has strengthened its relationships with pilots and crews and has positioned itself to benefit from leisure travel—which should accelerate sooner than business travel.”

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Disclosure: None. 10 Best Airline Stocks to Buy Now is originally published on Insider Monkey.