7 Top Airline Stocks for 2021: These Airlines Are Poised to Take Off as Travel Rebounds

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The post 7 Top Airline Stocks for 2021: These Airlines Are Poised to Take Off as Travel Rebounds appeared first on Millennial Money.

Looking for a few great airline stocks to buy right now? I’ve put together a list of seven of the best stocks in the airline industry.

It’s no surprise that the global pandemic decimated the airline industry across the globe in 2020. With planes grounded around the world, many airlines were forced to take severe cost-cutting measures to ride out the pandemic-induced storm.

But in many parts of the world, economies are reopening and air travel is bouncing back, thanks to a rise in COVID-19 vaccinations. The United States recently saw more than 2 million passengers passing through TSA’s airport screenings, representing 74% of the total travelers at the same time in 2019.

Airport screenings don’t usually cause anyone to celebrate, but both travelers and investors are seeing it as an important milestone on the way to the travel industry bouncing back.

If you’re in the market for airline stocks, some of which are, ahem, getting off the ground already (I’m hilarious), then read on to find out why these seven companies are some of the best stocks to benefit from travel recovery in 2021.

7 Top Airline Stocks

Here’s my list of the top 7 airline stocks.

American Airlines Group
United Airlines Holdings Inc.
Delta Air Lines, Inc.
Southwest Airlines Co
Allegiant Travel Company
JetBlue Airways Corporation
Spirit Airlines, Inc.

American Airlines Group (Nasdaq: AAL)

American Airlines Group (NASDAQ:AAL)
Price: $22.29 (as of close Jun 18, 2021)

American Airlines is one of the oldest U.S. airlines and it’s the largest airline company in the country based on passenger capacity, thanks to a merger with US Airways back in 2013.

Like all airlines, the company received a major shock to its business in 2020 as the pandemic spread across the globe. American Airlines responded in the same way you’d expect any business to respond when demand dries up: the company drastically cut costs.

The result was American Airlines going from a daily spend of $100 million near the beginning of the pandemic to just $27 million in the first quarter of 2021.

As expected, American Airlines is still suffering from a lack of leisure travel, business, and international travel demand. In the first quarter of 2021, revenue was down 53% as the result of a 39% reduction in total available seat miles.

The pandemic also caused American Airlines to take on even more debt, which the company was already struggling with before 2020. The company now has debt obligations of $50 billion, the most in the industry.

But as the U.S. economy opens back up and people are beginning to make travel plans again, American Airlines estimates that second-quarter capacity will only be down about 25% compared to the second quarter of 2019.

While the company’s share price took a major hit in 2020, American Airlines’ stock gained more than 100% in the first five months of 2021.

United Airlines Holdings Inc. (Nasdaq: UAL)

United Airlines Holdings (NASDAQ:UAL)
Price: $54.92 (as of close Jun 18, 2021)

With just $5 billion in debt, United Airlines doesn’t have the same debt issues that American Airlines has, but it’s also a much smaller company. And like the industry in general, United Airlines is seeing more travelers booking flights again.

The company’s management said in the first quarter of 2021 that if business and long-haul international demand returns to just 35% below 2019 levels, then the company will return to positive net income. You gotta celebrate the wins, right?!

In the first quarter of 2021, the company’s operating revenue was down 66% from the first quarter of 2019, thanks to passenger capacity that was down 54% from the first quarter of 2019.

But the company is seeing a turnaround in the travel industry as well and the company expects that second-quarter capacity will be down 45% from comparable 2019 levels and revenue per available seat mile (RASM) will be down 20%.

United’s share price has begun to rebound in 2021 and the company’s stock gained 35% in the first five months of 2021.

Delta Air Lines, Inc. (NYSE: DAL)

Delta Air Lines (NYSE:DAL)
Price: $44.96 (as of close Jun 18, 2021)

Delta Air Lines is another top airline stock investors are no doubt keeping a close eye on. The company’s share price gained 18% in the first five months of 2021 and there could be much more growth from this company as it emerges from the effects of the pandemic.

For one, the company is already experiencing significant demand for its flights, so much so that CEO Ed Bastian said recently that he expects Delta to return to profitability on a pre-tax basis by the second half of 2021. Not too shabby for a company whose entire business essentially dried up just last year.

That’s not to say that Delta doesn’t have its work cut out for it. But the company made some strategic moves during the pandemic—like simplifying its fleet—that helped it cut costs and improve its runway to profitability.

Delta still has sizable debt right now, to the tune of about $29 billion, but management expects its debt levels to subside over the next few years.

Customers love Delta and their loyalty is paying off, even before airline travel has fully returned. Management has said that Delta will achieve its goal of about $7 billion from its credit card partnership with American Express (NYSE: AXP) by 2023—up 63% from pre-pandemic levels.

Southwest Airlines Co (NYSE: LUV)

Southwest Airlines (NYSE:LUV)
Price: $55.19 (as of close Jun 18, 2021)

Southwest Airlines hardly needs an introduction considering the company is already widely known for its fun and friendly approach to the airline industry and its penchant for offering the best discounted airfares.

But it’s not just the airline’s customers who love Southwest. Investors are smitten with the company as well because the airline is consistently profitable.

Consider that Southwest is one of the only major airlines that’s never had a bankruptcy (cue the airhorn!). That’s a massive achievement in an industry where it can seem like companies are barely scraping by.

Southwest is known to have one of the best balance sheets in the airline industry and that’s helped the company weather the coronavirus-induced travel slowdown. In fact, Southwest was actually able to expand services in 2020 to nine new cities while its peers were cutting back on locations.

The company also made the wise move of expanding its travel bookings for companies beyond its own platform—making it easier than ever before to gain business travelers—which could be a boon to the company’s business as companies look for inexpensive ways to bring back business travel.

Southwest’s CEO Gary Kelly said on a recent earnings call about its business travel expansion that, “… the managed travel accounts will have wide access to a great network, great service, no bag fees, no change fees and low fares. They will finally have access to low fares. I think we will do extremely well there.”

With the company already on solid footing and its share price surging 32% in the first half of 2021, investors should keep a close eye on this fan-favorite airline.

Allegiant Travel Company (Nasdaq: ALGT)

Allegiant Travel (NASDAQ:ALGT)
Price: $194.85 (as of close Jun 18, 2021)

Allegiant Travel is a unique player in the airline industry because the company not only sells low-fare airline tickets, but also offers bundles for hotel rooms, rental cars, and even event tickets. And this one-stop-shop for travel booking is working out very well for the company.

The company was profitable on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis for the full-year 2020 and the company has a strong track record of profitability.

In fact, Allegiant CEO Maurice Gallagher, Jr. said on a recent earnings call that since the company’s beginning in 2001, it’s averaged a very impressive 15% operating margin. That’s even better than Southwest’s operating margin of 10%.

The company is already experiencing significant booking interest in early 2021, with management saying that the volume of flight searches by customers on the Allegiant website is outpacing 2019 levels. Furthermore, bookings in March 2021 performed at nearly the same levels as 2019.

And as travel rebounds, Allegiant is gearing up for some big plans. The company is aiming at expanding its services into 1,000 new markets. Ok Allegiant, dial down the ambition a bit, will ya?!

While other airline stocks haven’t performed so well over the past 12 months, Allegiant is the exception. The company’s stock began climbing in 2020 and has gained 78% over the past year (as of June 2021)!

JetBlue Airways Corporation (Nasdaq: JBLU)

JetBlue Airways (NASDAQ:JBLU)
Price: $17.31 (as of close Jun 18, 2021)

While Allegiant may be a pioneer in bundling its flights with other services, JetBlue recently started following suit with its new Paisly website.

The site allows customers who’ve purchased a JetBlue flight to also book a hotel, car rental, and even theme park tickets. The company’s management thinks Paisly could boost the company’s profits, and JetBlue CEO Robin Hayes said on the company’s first-quarter earnings call that he believes “this will be a significant contributor for future earnings growth.”

Aside from Paisly, JetBlue is pursuing other ways to get its business back into shape following the pandemic. Namely, the company will start offering flights to London for the first time! The flights will begin in late 2021, starting first from New York City and then from Boston.

Just like its peers, this low-cost airline is mapping out its path to profitability, and JetBlue’s chief financial officer, Steve Priest, thinks the company will become profitable on an EBITDA basis again following the company’s third-quarter 2021.

Spirit Airlines, Inc. (NYSE: SAVE)

Spirit Airlines (NYSE:SAVE)
Price: $33.15 (as of close Jun 18, 2021)

Spirit Airlines is the little engine (turbine) that could in the airline industry. The company’s ultra-low-cost fares make flying more accessible to passengers than some of its higher-priced peers.

That approach has helped the company compete in a hyper-competitive market and investors have taken notice of Spirit’s…. well, spirit (I’m so sorry). On top of that, they’ve pushed up the low-cost carrier’s stock price 66% over the past 12 months (as of June 2021).

The company makes up for its low fare prices by offering add-ons like seat selection (aisle seat please!) and baggage check-in fees. Spirit depends on those fees to bring in about half of the company’s total passenger revenue.

Like the other airlines, Spirit is seeing a travel recovery, but the company still has some hurdles to overcome. Management estimates that in the full year 2021, capacity will be flat compared to 2019. But it’s optimistic that capacity in 2022 will be up 30% compared to 2021.

Airline ETFs: Invest in a Basket of Airline Stocks All at Once

If you want to bet on the airline industry recovery but don’t feel comfortable picking just one stock (or even a few!) that you think will benefit, then investing in an airline exchange-traded fund (ETF) may be a good choice for you.

An ETF gives you exposure to a basket of stocks in a particular stock market segment. They can be a wise investment if you don’t like diving into quarterly financial reports (sounds like my idea of a good time).

If an airline ETF sounds good to you, then you may want to consider investing in the US Global Jets ETF (NYSEARCA: JETS), the iShares Transportation Average ETF (BATS: IYT), or the SPDR S&P Transportation ETF (NYSEARCA: XTN).

Frequently Asked Questions

What is the best airline stock to buy?

The answer depends on what an investor is looking for from any particular airline stock. But from our list of airline stocks, the best-performing stocks over the past year (with gains of 50% or more as of June 2021) are Allegiant Travel, Spirit Airlines, and Southwest Airlines.

Are airline stocks a good buy right now?

Some airline stocks will fare better than others as travel begins to rebound. Generally speaking, if you’re considering investing in airline stocks, make sure you find a company that has a strong balance sheet, is investing in future opportunities, and is well-positioned compared to its peers to grow over the long term.