In this article we are going to list the 10 best airline stocks to buy for 2024 using the intelligence we gained from the latest hedge fund filings.
Despite rising inflation, consumers worldwide continue to spend on travel and experiences, defying all expectations and forecasts. Latest data from the International Air Transport Association (IATA) estimates that the airline industry is expected to generate $30.5 billion in net income in 2024, driven by higher ticket prices and consumers’ desire to travel. Last year, the industry’s net income came in at $27.4 billion. According to data from the World Travel & Tourism Council (WTTC) the economic impact of the travel industry this year is expected to soar to $11.1 trillion, beating its precious level of $10 trillion recorded in 2019. The Council expects the tourism industry to become a $16 trillion industry over the next decade, accounting for about 11.4% of the global GDP.
However, not all is rosy in the airline industry. The competition in the industry is increasing, while geopolitical headwinds and rising employee costs continue to batter small and large airline companies. IATA was quick to highlight that despite the industry growth, airlines’ profit per passenger is just $6.14. Travel demand in China also remains subdued amid real estate and economic crisis in the country. However, analysts believe sooner or later the country would rebound and the best airline and travel companies would benefit from the influx of Chinese tourists.
A KPMG report on the airline industry highlighted the resilience of the airline industry and its fast recovery to pre-pandemics levels:
“The latest air travel data from IATA shows that passenger travel for November 2023 globally has reached 99.1% of November 2019 levels. November 2023 international RPKs reached 94.5% of November 2019 levels, while domestic traffic was 6.7% above the November 2019 level. Although international global travel remains 5.5% below pre-pandemic levels, IATA director general Willie Walsh said that the gap is “rapidly closing”, adding that current “economic headwinds are not deterring people from taking to the skies”. IATA also noted that long-term airline profitability shows that while the industry is exposed to external shocks, it typically returns to profitability “relatively quickly”.”
In this backdrop, we decided to take a look at some of the best airline stocks to buy in 2024 according to hedge funds. For that we first listed down all holdings of an airline ETF, which provides investors exposure to the airline industry and tracks some of the biggest and most important airlines and aviation companies of the US and worldwide. From these stocks we chose 10 companies with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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10. Ryanair Holdings Plc (NASDAQ:RYAAY)
Number of Hedge Fund Investors: 20
Ireland-based ultra low-cost carrier Ryanair Holdings Plc (NASDAQ:RYAAY) ranks 10th on our list of the best airline stocks to buy in 2024 according to hedge funds. The company last month posted results for the year ending March 2024. Profit after tax in the period jumped 34% to 1.92 billion euros ($2.09 billion), while revenue saw a growth of 25% year on year to 13.44 billion euros. Despite Boeing-related delays, the company saw a 9% increase in traffic. As consumers reel under inflation and look for cheaper options, the budget airliner has been able to grow and see 100% load factors and expansion throughout Europe.
However, Ryanair Holdings Plc (NASDAQ:RYAAY) bears believe the company’s growth might slow down in the coming months amid increasing competition and costs. Another problem for the company has been online travel agents (OTAs) who have been adding unauthorized fees to the company’s fares. These concerns were highlighted by Deutsche Bank last month which downgraded the stock to Hold from Buy, pointing to the company’s acknowledgement that it’s seeing customer “resistance” against increasing prices. The bank’s analyst Jaime Rowbotham expects fares per passenger to remain flat on a YoY basis in fiscal 2024. The analyst said this would affect Ryanair Holdings Plc (NASDAQ:RYAAY)’s net profit in the future. Despite this, the stock’s valuation is attractive when compared to peers. UBS said in a May report that Ryanair Holdings Plc (NASDAQ:RYAAY) ‘s 12-month forward PE was 29% less than its US peers. The company’s revenue is expected to rise 9.90% this year and by 11.9% in fiscal 2026, while earnings growth is expected to come in at 13%. Based on these growth estimates, Ryanair’s forward P/E of 11.22 is indeed low.
As of the end of the first quarter of 2024, 20 hedge funds in Insider Monkey’s database of 919 reported owning stakes in Ryanair Holdings Plc (NASDAQ:RYAAY).
In its fourth quarter 2023 investor letter, Oakmark International Fund stated the following regarding Ryanair Holdings plc (NASDAQ:RYAAY):
“Ryanair Holdings plc (NASDAQ:RYAAY) (Ireland), a European ultra-low-cost airline, was the top contributor to the Fund’s performance this quarter. Ryanair released strong results for the first half of fiscal-year 2024 and was accompanied by an even stronger outlook, in our view. The company’s revenue grew 30% year over year, and average fares increased by 24% to EUR 58, driven by record demand and constrained capacity at European peers. Total passengers flown expanded 11% year over year to 105.4 million, and management is on track to maintain its target of 183.5 million passengers for 2024, depending on Boeing’s ability to meet its delivery commitments. Management is expecting full-year 2024 net income to be between EUR 1.85-2.05 billion ahead of the EUR 1.82 billion consensus estimate. The company’s strong free cash flow levels and balance sheet allowed Ryanair to reinstate a EUR 400 million dividend (35 cents per share). We spoke with CEO Michael O’Leary about additional uses for its excess capital and were happy to hear about an incremental EUR 1.5 billion return to shareholders starting in 2025. We continue to be optimistic about Ryanair’s future.”
9. JetBlue Airways Corporation (NASDAQ:JBLU)
Number of Hedge Fund Investors: 23
JetBlue Airways Corporation (NASDAQ:JBLU) shares saw turbulence in April when the company posted Q1 results which showed that higher operating costs per passenger affected its profit in the period. JetBlue Airways Corporation (NASDAQ:JBLU) also decreased its FY24 revenue forecast amid oversupply issues in Latin America, one of the company’s biggest markets. JetBlue management said it expects a slowdown in the region and explained the challenges during Q1 earnings call:
“However, that also means most of the industry has shifted a portion of their flying to meet this increasing demand for leisure travel, allocating capacity to many of JetBlue’s bread and butter routes. Specifically we continue to see elevated capacity in the Latin region, which represents 35% of our total ASMs and is one of our most valuable and profitable geographies. The elevated capacity in this region is significantly pressuring the overall revenue acceleration we expected to see from the first quarter into the second quarter. We’ve, therefore, revised our full year guidance and no longer expect to approach breakeven adjusted operating margin for the full year.”
JetBlue Airways Corporation (NASDAQ:JBLU) has been in the news this year, but not for the right reasons. In March, the company called off its merger with Spirit Airlines after losing an anti-trust lawsuit. During the second quarter, JetBlue Airways Corporation (NASDAQ:JBLU) expects its revenue to tank by 10.5% to 6.5% and available seat miles to be down 5% to 2%. Cost per available seat mile excluding fuel is also expected to soar in the range of 5.5% to 7.5%. In April, 5000 pilots represented by the Air Line Pilots Association (ALPA) gave a notice to the company to start negotiations for a new collective bargaining agreement. In an environment where the industry players are already getting squeezed by increasing employee costs and declining per-seat revenue, JetBlue Airways Corporation (NASDAQ:JBLU)’s troubles could increase with new pay raises. In FY 2023, JetBlue incurred over $3 billion in salaries, wages, and compensation, which was an over 11% YoY increase.
All of this would hinder JetBlue Airways Corporation (NASDAQ:JBLU)’s plan to turn to profitability. According to data from Yahoo Finance, JetBlue’s earnings growth over the past five years has been in the negative territory, at -9.6%. Average analyst price estimate on the stock set by Wall Street is $6.02, very near to the stock’s current price of $5.56. This shows the stock does not have much upside from the current levels.
8. SkyWest Inc (NASDAQ:SKYW)
Number of Hedge Fund Investors: 24
Utah-based SkyWest Inc (NASDAQ:SKYW) is a regional airliner that has seen its share price gain 52% so far this year. In April SkyWest Inc (NASDAQ:SKYW) posted solid Q1 results, which showed its GAAP EPS in the period came in at $1.45 beating estimates by $0.26. Revenue in the quarter jumped 16.2% year over year to $804 million, surpassing estimates by $3.93 million. SkyWest Inc (NASDAQ:SKYW) bulls believe the company has a wider moat in the industry, as it targets on regional flights to smaller airports. SkyWest Inc (NASDAQ:SKYW) also has a large fleet for a small airline, which also gives it a pricing advantage over others. The company has long-term, fixed-fee contracts with major airlines including Alaska (ALK), American (AAL), Delta (DAL), and United (UAL). SkyWest Inc (NASDAQ:SKYW) expenses are also low because it does not spend a fortune on marketing and booking; most of its customers come from its partnerships with peers. Last year, SkyWest’s expense-to-sales ratio was 9.1%, while this metric was 18.7% for United Airlines, 15.2% for Southwest and about 18% for Spirit.
Despite its strong performance, SkyWest Inc (NASDAQ:SKYW) forward P/E ratio is 11.48, much lower than the industry median of 18. Its forward EV/EBITDA, a common metric used to value airlines, is just 6.2, much lower than the industry median of 12.88. The company’s revenue in 2025 is expected to rise by 9.60% while earnings growth is expected to be at around 17.10%. This makes SkyWest an undervalued play and one of the best airline stocks to buy for 2024 and beyond.
7. Copa Holdings, S.A. (NYSE:CPA)
Number of Hedge Fund Investors: 26
Panama-based airline company Copa Holdings, S.A. (NYSE:CPA) owns Copa Airlines and Colombia-based AeroRepública. Last month the company beat Q1 estimates on both EPS and revenue. Adjusted EPS in the quarter came in at $4.19, beating estimates by $0.86. Revenue in the quarter jumped 3% year over year to $893.5 million, beating estimates by $21.74 million. In April, the company’s capacity (ASMs) increased by 9.6%, while system-wide passenger traffic (RPMs) surged 11.2% on a YoY basis.
Copa Holdings, S.A. (NYSE:CPA) has impressed the Wall Street amid its smart expense management despite a tough industry environment. During the first quarter, the company’s operating expenses inched up by just 0.5% amid lower maintenance costs. Unit costs also declined by 6.9%, and by 2% excluding fuel costs. Operating margins also increased from 22.3% to 24.2%. Analysts believe Copa Holdings, S.A. (NYSE:CPA) margins would have been over 30% had it not suffered the impact of the grounding of the Boeing 737 MAX 9 which cost the airline around $44 million.
Wall Street expects Copa’s earnings growth to come in at 9.60% in 2024 and revenue growth to come in at 8.50%. Its forward P/E ratio is 6.39, much lower than industry median of 21. The stock’s forward EV / EBITDA (FWD) is 4.18, compared to the industry median of 11. Wall Street analysts have an average price target of $158.54 on the stock, which presents a 62% upside potential from the current levels.
6. Alaska Air Group, Inc. (NYSE:ALK)
Number of Hedge Fund Investors: 28
Alaska Air Group, Inc. (NYSE:ALK) is one of the biggest airlines in the world in terms of scheduled passengers carried. The stock is up about 6% so far this year. But Wall Street sees more upside potential to the stock. Last month, Wolfe Research upgraded the stock to Outperform from Perform, citing corporate recovery, lower regional jet fuel prices, and improving competitive capacity. Wolfe Research set a $55 price target on the stock, which represents a 40% upside potential from the current levels.
In April, Alaska Air Group, Inc. (NYSE:ALK) reported strong Q1 results and gave upbeat Q2 and full-year guidance. The company’s management said that despite significant headwinds the company has exceeded challenges. The company’s management also talked about Boeing-related headwinds and compensations it received from the company during Q1 earnings call:
“As you are all aware, the most significant event this quarter was the accident involving Flight 1282 and the subsequent 4-week grounding of a third of our fleet. Our focus has been on the safe return of our fleet, caring for our employees and guests and enhancing our oversight of the production of our new aircraft. This event also had a substantial financial impact, totaling $162 million, which Boeing has fully compensated us for. To provide clarity on our core business performance, I will discuss our Q1 results, excluding the effects of Flight 1282 and the MAX grounding. During the quarter, we also received a second request for information from the DOJ, regarding our proposed acquisition of Hawaiian Airlines.
We are working to respond to these requests as quickly as possible. Given the substantial volume of information involved, we have granted the government an additional 60 days to review our responses, and we’ll continue to work with them to advance the process as swiftly as possible. We still believe strongly in the pro-consumer and pro-competitive merits of this deal and are excited by the opportunities this will unlock for Alaska, both domestically and internationally. “
In 2024, Alaska Air Group, Inc. (NYSE:ALK) expects its yield per revenue passenger mile to increase 3.5% on a YoY basis. Investors are also looking forward to the regulatory outcome on the company’s plan to acquire Hawaiian Airlines for $1.9 billion deal. Analysts believe if the deal goes through, Alaska Air Group, Inc. (NYSE:ALK) would be able to consolidate the West Coast business.
Alaska Air Group, Inc. (NYSE:ALK) stock is trading at 6.46x 2025 EPS estimate set by Wall Street. This forward P/E ratio is much lower than the industry median of 18.54. Given the company’s EPS growth expectation of 39% in 2025 and 19% in 2026, the stock looks attractively valued.
Diamond Hill Long-Short Fund made the following comment about Alaska Air Group, Inc. (NYSE:ALK) in its Q3 2023 investor letter:
“Other bottom contributors included our long positions in Alaska Air Group, Inc. (NYSE:ALK), Target Corporation and Johnson Controls International (JCI). Shares of regional airline Alaska Air Group and general merchandise retailer Target declined during the quarter amid a weakening consumer and (in Alaska’s case) airline pricing environment.”
5. Hawaiian Holdings, Inc. (NASDAQ:HA)
Number of Hedge Fund Investors: 29
Hawaiian Holdings, Inc. (NASDAQ:HA) has been facing headwinds amid rising costs, increasing competition and uncertainties around its merger with Alaska Airlines, which is still awaiting regulatory approval. The company has suffered following the entry of Southwest Airlines (LUV) in its market. Southwest increased its capacity for US to Hawaii by introducing new routes or increasing existing frequencies. Before LUV’s entry, Hawaiian Holdings, Inc. (NASDAQ:HA) used to enjoy 90% market share in its region, which fell dramatically after Southwest offered aggressive discounts and poached about 30% market share. Hawaiian Holdings, Inc. (NASDAQ:HA) is also struggling to see recovery in the number of Japanese tourists. The number of visitors from Japan last year only reached around 40% of the 2019 level as US dollar strength against the Japanese currency took a toll on Japanese consumers’ buying power.
Hawaiian Holdings, Inc. (NASDAQ:HA) shares fell in April after the company posted wider-than-expected Q1 loss of $2.77 per share. However, revenue in the quarter came jumped 5.4% YoY to $645.6 million, surpassing estimates of $629.2 million. Loss in the period came in at $138 million, much higher than the $98 million loss posted in the year-ago period.
Average analyst estimate for Hawaiian Airlines set by Wall Street analysts is $11.25, which is lower than the stock’s current price of $13.
A total of 29 hedge funds tracked by Insider Monkey reported owning stakes in Hawaiian Holdings, Inc. (NASDAQ:HA) as of the end of the first quarter of 2024.
4. Southwest Airlines Co (NYSE:LUV)
Number of Hedge Fund Investors: 33
With a dividend yield of 2.6%, Texas-based Southwest Airlines Co (NYSE:LUV) is one of the best airline stocks to buy in 2024 according to smart money investors. Of the 919 hedge funds tracked by Insider Monkey 33 hedge funds reported owning stakes in Southwest Airlines Co (NYSE:LUV). The biggest stake in Southwest Airlines Co (NYSE:LUV) is owned by Richard Oldfield’s Oldfield Partners which owns a $71 million stake in Southwest Airlines Co (NYSE:LUV). In April, Southwest Airlines Co (NYSE:LUV) shares fell after Southwest Airlines Co (NYSE:LUV) report a loss of $0.36 per share. Wall Street analysts were expecting Southwest Airlines Co (NYSE:LUV) to earn $0.02 per share. Revenue in the quarter jumped 10.3% year over year, missing estimates by $120 million. Like other major airlines, Southwest Airlines Co (NYSE:LUV) is bearing the brunt of the grounding of Boeing (BA) 737 MAX 9.
Southwest Airlines Co’s (NYSE:LUV) rising labor and maintenance costs in the first quarter worried investors as well as the Wall Street. Recently, Argus downgraded the stock to Hold, saying higher employee costs and delayed deliveries would cause Southwest Airlines Co (NYSE:LUV) to take longer than expected to make a turnaround. Jefferies also downgraded the stock to Hold in April, citing near-term pressures. Jefferies analyst Sheila Kahyaoglu said Southwest Airlines Co’s (NYSE:LUV) low-cost operating model is challenged by higher employee costs and other inflationary pressures. One-year average analyst price estimate for Southwest Airlines Co (NYSE:LUV) is $28, while the stock’s current price is hovering around $27. This shows that based on Wall Street analyst price targets, there isn’t much upside left to the stock in the near term.
3. American Airlines Group Inc (NASDAQ:AAL)
Number of Hedge Fund Investors: 43
American Airlines Group Inc (NASDAQ:AAL) shares are taking a hit amid guidance cuts, Boeing-related headwinds and a limited capacity heading into the summer travel season. Last month, American Airlines Group Inc (NASDAQ:AAL) lowered its adjusted profit guidance for the second quarter. American Airlines Group Inc (NASDAQ:AAL) expects the figure to be in the range of $1.00-$1.15, lower than its prior guidance of $1.15-$1.45. Wall Street was expecting American Airlines Group Inc (NASDAQ:AAL) to report Q2 adjusted profit at $1.27. Q2 net operating margin in the period is expected to be between 8.5%-10.5%, compared to its earlier outlook of ~9.5%-11.5%. In the first quarter, American Airlines Group Inc (NASDAQ:AAL) operating expenses jumped 6.9% on a YoY basis despite a decline in fuel prices. This was due to a whopping $586 million increase in salaries, wages, and benefits. Despite this, American Airlines Group Inc (NASDAQ:AAL) bulls believe the stock would rebound as the company’s moat lies in its sheer size and dominance, with nearly 7,000 daily flights across 350 destinations. American Airlines Group Inc (NASDAQ:AAL) cut its debt in the first quarter by $950 million to $41.7 billion.
American Airlines Group Inc (NASDAQ:AAL) is trading at 4.07X its 2025 expected earnings, lower than the sector median of 18. The stock’s EV / EBITDA (FWD) is 5.82, lower than the industry average of 11. Wall Street analysts have a one-year average price target of 15.96 on the stock, which represents a 38% upside potential from the current levels.
2. United Airlines Holdings Inc (NASDAQ:UAL)
Number of Hedge Fund Investors: 46
United Airlines Holdings Inc (NASDAQ:UAL) is one of the best airline stocks to buy for 2024 according to hedge funds. The stock is up about 29% so far this year. Last month, Jefferies analyst Sheila Kahyaoglu gave a Buy rating to the stock, saying the stock presents a wealth creation opportunity. The analyst, who has a $65 price target on the stock, highlighted United Airlines Holdings Inc’s (NASDAQ:UAL) shareholder returns, free cash flow potential, and international margin upside. United Airlines Holdings Inc (NASDAQ:UAL) in April surprised the Wall Street with its strong Q1 results despite the Boeing 737 MAX 9-related impact earlier this year. United Airlines Holdings Inc’s (NASDAQ:UAL) Q2 expectations are also upbeat. It expects EPS in the range of $3.75 and $4.25, compared to the Wall Street estimates of $4. Based on Wall Street’s EPS estimate for United Airlines Holdings Inc (NASDAQ:UAL), United Airlines Holdings Inc’s (NASDAQ:UAL) EPS growth next year is expected to come in at around 17%. Over the next five years, United Airlines Holdings Inc (NASDAQ:UAL) growth is forecasted to remain at around 29% on an annual basis. In this backdrop, United Airlines’ P/E of 6.5 makes the stock look undervalued. The industry median P/E is 18.7.
A total of 46 hedge funds tracked by Insider Monkey reported owning stakes in United Airlines Holdings Inc (NASDAQ:UAL) as of the end of the first quarter.
ClearBridge Value Equity Strategy stated the following regarding United Airlines Holdings, Inc. (NASDAQ:UAL) in its fourth quarter 2023 investor letter:
“Our industrials stocks faced headwinds early in the quarter due to fears of a recession, which weighed on some of our more cyclical industrials such as United Airlines Holdings, Inc. (NASDAQ:UAL). Additionally, the Fed’s pivot and the prospect of rate cuts in 2024 helped fuel a rally in lower-quality industrials that we did not hold, further dampening the performance of our high-quality holdings.”
1. Delta Air Lines, Inc. (NYSE:DAL)
Number of Hedge Fund Investors: 51
Delta Air Lines, Inc. (NYSE:DAL) is the most popular airline stock among the 919 hedge funds tracked by Insider Monkey. A total of 51 hedge funds reported owning stakes in Delta Air Lines, Inc. (NYSE:DAL) as of the end of the March quarter. HSBC analyst Achal Kumar recently started covering the stock, along with three other major airliners, with a Buy rating. The analyst is bullish on the stocks amid strong demand.
Kumar thinks Delta Air Lines, Inc. (NYSE:DAL) is in the strongest position when compared to competitors like United Airlines and American Airlines, as the company owns 70% to 75% market share at its top six hubs.
Delta Air Lines, Inc. (NYSE:DAL) earnings are expected to grow by 10% in 2025. The stock is currently trading at 6.9x its 2025 EPS estimate. This forward P/E is lower than the sector median of 18.75.
Average Wall Street analyst price target for Delta Air Lines, Inc. (NYSE:DAL) is $61, which presents a 20% upside potential from the current levels. Being the top airline in the US, Delta Air Lines, Inc. (NYSE:DAL) is a clear beneficiary of the expected travel recovery in the next few years. Bain & Company expects annual air travel demand to exceed 2019 in 2024. Delta Air Lines, Inc. (NYSE:DAL) is the largest airline in the US in terms of domestic revenue.
Oakmark Fund stated the following regarding Delta Air Lines, Inc. (NYSE:DAL) in its first quarter 2024 investor letter:
“Delta Air Lines, Inc. (NYSE:DAL) is a leading global airline. Of the big three U.S.-based airlines (Delta, United and American), we see Delta as the most competitively advantaged. We believe the company’s years of industry-leading operational performance and investments in the customer experience have established Delta as the premium brand in the industry. We also think its geographically optimal hubs, high local market share, robust loyalty program and unique corporate culture all support healthy returns on capital. Delta currently trades at 6x our estimate of normalized earnings per share. We believe this is an attractive valuation for a competitively advantaged and growing business in an out-of-favor industry.”
While we acknowledge the potential of Delta (DAL) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DAL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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