10 Best Airline Stocks to Buy According to Hedge Funds

3. American Airlines Group Inc. (NASDAQ:AAL)

Number of Hedge Fund Holders: 38

American Airlines Group Inc. (NASDAQ:AAL) is an airline holding company, which owns American Airlines – one of the largest commercial airlines in the world with over 900 aircraft in its fleet, flying passengers to more than 350 destinations worldwide.

The airline operates around 6,700 flights daily to and from its strong network of hubs in various key cities of the United States. These include Charlotte, Chicago, Dallas-Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C.

During Q2 2024, American Airlines Group announced a record quarterly revenue of $14.3 billion, up 2% year-over-year, and posted an adjusted pre-tax profit of $1 billion. Net income for the second quarter stood at $774 million, translating to earnings per share of $1.09. The results were in line with the revised guidance issued in May. However, CEO Robert Isom admitted that the revenue performance was not where the company wanted it to be.

The air carrier’s revenues have been affected by an imbalance between domestic supply and demand, which has prompted airlines to discount tickets, resulting in weaker pricing. Unit revenue was down 5.6% during Q2. The company’s figures have also been negatively affected by approximately $750 million year-to-date from its ineffective sales and distribution strategies.

The airline has now vowed to diligently ensure that capacity does not outgrow demand. The management has decided to lower capacity growth for the back half of the year and plans for a capacity increase of 3% in the third quarter. With these measures, the company expects full-year TRASM to be down between 3% and 5% compared to 2023. It also anticipates achieving cost savings worth $400 million in 2024 and is working on a course correction plan for its sales and distribution strategy.

The company is confident of overcoming the headwinds it currently faces to further solidify its position in the industry. Wall Street analysts also remain bullish on the stock and have consensus on American Airlines Group Inc. (NASDAQ:AAL)’s Buy rating, with an average share price upside potential of 5.50%. Moreover, as of June 30, 2024, 38 hedge funds tracked by Insider Monkey had investments in the company, making it one of the best airline stocks to buy according to hedge funds.

One reason driving investor confidence is the airline’s strong liquidity position. During Q2 2024, American Airlines generated $850 million of free cash flow, which meant it ended the quarter with $11.7 billion in total available liquidity. It also ended debt worth $680 million during the quarter, taking the total debt reduction figure from the peak levels of 2021 to $13 billion. The airline is on track to reduce debt by $15 billion from peak levels by the end of 2025.