In this article, we discuss the 10 best airline stocks to buy today. If you want to skip our detailed analysis of these stocks and the outlook about the aviation industry, go directly to 5 Best Airline Stocks To Buy Today.
The aviation industry is a significant contributor to global economic development, accounting for $3.5 trillion, or 4.1%, of global GDP in 2018, according to the 2020 Aviation Benefits report. Airlines around the world have been directly impacted by the COVID-19 pandemic, resulting in a massive drop in traffic and revenues last year. According to the world air transport statistics from the International Air Transport Association (IATA), only 1.8 billion passengers flew in 2020, a 60.2% drop from 4.5 billion passengers in 2019. However, as vaccination rollout accelerates and international travel restrictions are lifted, the airline industry is gradually recovering from the pandemic’s effects.
Despite the COVID-19 crisis, the global airline industry is expected to grow at a CAGR of 12.7% to $744 billion by 2026, up from $332.6 billion in 2020 according to a market report published by the Global Industry Analysts (GIA). As airlines steadily recover from the pandemic, IATA estimates that the global airline industry would lose approximately $12 billion in 2022, down 78% from projected losses of $52 billion in 2021.
One of the major catalysts supporting the growth of the airline industry is the increasing vaccination rate globally. In the United States, the Biden administration recently announced that restrictions on fully vaccinated travelers entering the country would be lifted beginning November. In addition, major US-based airlines including United Airlines Holdings, Inc. (NASDAQ:UAL), American Airlines Group Inc. (NASDAQ:AAL), and Southwest Airlines Co. (NYSE:LUV) are mandating employees to get vaccinated against COVID-19.
E-commerce was one of the industries that prospered during the pandemic and it drove revenue in air cargo transportation. According to IATA’s e-commerce monitoring study published in June 2021, air cargo accounted for 30% to 35% of airline revenue in 2020. This led to the rebound of air cargo above 2019 levels, which is expected to continue in 2022. Some of the biggest air cargo companies include Air Transport Services Group, Inc. (NASDAQ:ATSG), Alaska Air Group, Inc. (NYSE:ALK), and Cargojet Inc. (OTC:CGJTF).
The presence of digital travel agencies such as Expedia Group, Inc. (NASDAQ:EXPE) was a significant revenue contributor that helped some airline companies survive the pandemic. The Seattle-based online travel platform offers a template technology called Expedia Partner Solutions (EPS), which enables airlines to merge additional travel components on their website. At the end of the second quarter of 2021, Expedia Group, Inc.’s (NASDAQ:EXPE) B2B segment saw a 348% year-over-year increase in revenue to $305 million, up from $68 million in Q2 2020. More broadly, the online travel company’s second-quarter revenue came in at $2.11 billion, up 273% year over year, and beat revenue estimates by $128 million. Air revenue accounted for 4% of overall revenue in the second quarter.
Image by Rudy and Peter Skitterians from Pixabay
Our Methodology
These are some of the most popular airline stocks among the 873 hedge funds tracked by Insider Monkey. We ranked the list based on the number of hedge funds having stakes in each firm as of the second quarter.
We included only those airline stocks that have positive analyst ratings and long-term growth catalysts.
Why should we pay attention to hedge fund sentiment while choosing stocks? 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 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by 86 percentage points (see the details here). 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.
Let’s now look at the 10 best airline stocks to buy today.
Best Airline Stocks To Buy Today
10. Frontier Group Holdings, Inc. (NASDAQ:ULCC)
Number of Hedge Fund Holders: 10
We start our list of the 10 best airline stocks to buy today with the cheap-fare airline company Frontier Group Holdings, Inc. (NASDAQ:ULCC). The Colorado-based airline serves 110 airports across the United States and flies customers to international destinations in the Americas. At the end of the second quarter of 2021, Frontier Group Holdings, Inc. (NASDAQ:ULCC) owned 109 aircraft.
Frontier Group Holdings, Inc. (NASDAQ:ULCC) posted a 184% year-over-year increase in revenue to $550 million as leisure travel progressively recovers from its pandemic low. During the second quarter of 2021, Frontier Group Holdings, Inc. (NASDAQ:ULCC) operated over 400 flights per day, which was 10% more than the pre-COVID quarter in 2019.
Of the 873 elite funds tracked by Insider Monkey, 10 were long Frontier Group Holdings, Inc. (NASDAQ:ULCC) at the end of June.
Analyst Jamie Baker of JPMorgan upgraded his rating on the airline stock to Overweight from Neutral and raised his price target to $22 from $20. The analyst believes that Frontier Group Holdings, Inc. (NASDAQ:ULCC) along with other airlines, has room to grow as COVID-19 restrictions on US borders are due to be lifted.
Just like United Airlines Holdings, Inc. (NASDAQ:UAL), American Airlines Group Inc. (NASDAQ:AAL), Southwest Airlines Co. (NYSE:LUV), and Delta Air Lines, Inc. (NYSE:DAL), Frontier Group Holdings, Inc. (NASDAQ:ULCC) is one of the airline stocks that investors are watching today.
9. Textron Inc. (NYSE:TXT)
Number of Hedge Fund Holders: 22
Textron Inc. (NYSE:TXT) is a Rhode Island-based aerospace and defense company that ranks ninth on the list of 10 best airline stocks to buy today. Textron Inc. (NYSE:TXT) manufactures and commercializes business jets, tiltrotor systems, and commercial helicopters for military and commercial use.
Textron Inc. (NYSE:TXT) shares have risen 100.84% in the last year and 48.44% year to date, as business jet traffic recovered faster than passenger airlines in the United States from COVID-19 pandemic lows.
On August 31, Cowen analyst Cai von Rumohr upgraded Textron Inc. (NYSE:TXT) to Outperform from Market Perform and increased his price target for the stock to $95 from $75, citing that the Delta variant could boost demand for business jets in comparison to the onset of the COVID-19 pandemic.
The aerospace company delivered 44 jets in the second quarter of 2021, up from 23 jets in Q2 2020, and 33 commercial turboprops, up from 15 in the same quarter last year. Revenue in the aviation segment grew by 55.4% year over year to $1.2 billion in the second quarter of 2021. Textron Inc.’s (NYSE:TXT) total revenue in the second quarter was $3.19 billion.
At the end of the second quarter of 2021, 22 hedge funds in the database of Insider Monkey held stakes worth $962 million in Textron Inc. (NYSE:TXT), up from 21 in the previous quarter worth $702 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Pzena Investment Management is a leading shareholder in Textron Inc. (NYSE:TXT) with 7.75 million shares worth more than $533 million.
Textron Inc. (NYSE:TXT) together with United Airlines Holdings, Inc. (NASDAQ:UAL), American Airlines Group Inc. (NASDAQ:AAL), Southwest Airlines Co. (NYSE:LUV), and Delta Air Lines, Inc. (NYSE:DAL) are some of the biggest airline stocks that are getting more popular among investors today.
8. Allegiant Travel Company (NASDAQ:ALGT)
Number of Hedge Fund Holders: 29
Allegiant Travel Company (NASDAQ:ALGT) is a prominent leisure travel company in the United States, with schedules and charter airline services across the country as well as charter flights to Canada and Mexico.
The travel company, which ranks eighth in our list of the 10 best airline stocks to buy today, is also getting positive attention from market analysts. On October 12, Deutsche Bank analyst Michael Linenberg maintained a Buy rating on Allegiant Travel Company (NASDAQ:ALGT) with a price target of $275. At the end of June, 29 funds out of the 873 tracked by Insider Monkey had stakes in the company, compared to 22 in the previous quarter.
7. SkyWest, Inc. (NASDAQ:SKYW)
Number of Hedge Fund Holders: 37
With a fleet of over 450 aircraft, SkyWest, Inc. (NASDAQ:SKYW) ranks seventh on the list of 10 best airline stocks to buy today. The Utah-based aircraft leasing company operates through partnerships with American Airlines Group Inc. (NASDAQ:AAL), United Airlines Holdings, Inc. (NASDAQ:UAL), Alaska Air Group, Inc. (NYSE:ALK), and Delta Air Lines, Inc. (NYSE:DAL).
The airline stock increased 28.33% year to date, with the company reporting a 157% year-over-year boost in block hours on completed flights in the second quarter of 2021. The company’s revenue in the second quarter came in at $657 million, an increase of 88% year over year, and beat revenue estimates by $57.4 million.
As indicated in the company’s Q2 2021 results announced in July, SkyWest, Inc. (NASDAQ:SKYW) has a flying contract with Alaska Air Group, Inc. (NYSE:ALK) to provide nine E175 aircraft to be delivered in 2022 and in the first half of 2023. In addition, SkyWest, Inc. (NASDAQ:SKYW) will be delivering 20 E175 aircraft to American Airlines Group Inc. (NASDAQ:AAL) in the second half of 2021 and in 2022.
On August 20, investment bank Raymond James maintained a Strong Buy rating on SkyWest, Inc. (NASDAQ:SKYW) and raised its price target for the stock to $66 from $56 previously.
At the end of the second quarter of 2021, 14 hedge funds in the database of Insider Monkey held stakes worth $29 million in SkyWest, Inc. (NASDAQ:SKYW).
6. Alaska Air Group, Inc. (NYSE:ALK)
Number of Hedge Fund Holders: 38
One of the biggest airlines in the US, Alaska Air Group, Inc. (NYSE:ALK) ranks sixth on the list of 10 best airline stocks to buy today. Alaska Air Group, Inc. (NYSE:ALK) provides domestic passenger and air cargo transportation to clients across the US. The company also serves flights to Mexico, Canada, Costa Rica, and Belize.
Alaska Air Group, Inc. (NYSE:ALK) saw its stock rise 0.85% in premarket trade on October 5 after the airline company announced a new commercial agreement with Iberia Airlines. Alaska Air Group, Inc. (NYSE:ALK) customers will be given access to foreign locations in Europe starting October 7, and in return, Iberia passengers will be able to book tickets and connect to Alaska Airlines routes.
On October 1, JPMorgan analyst Jamie Baker kept an Outperform rating on Alaska Air Group, Inc. (NYSE:ALK) and raised his price target for the stock to $97 from $94.
As demand for travel improved, the airline’s passenger revenue increased 338% year over year to $1.3 billion in the second quarter of 2021. Alaska Air Group, Inc.’s (NYSE:ALK) revenue in the second quarter came in at $1.53 billion and beat revenue estimates by $9.22 million.
Of the 873 elite funds tracked by Insider Monkey, 38 were long Alaska Air Group, Inc.’s (NYSE:ALK) at the end of the second quarter, up from 32 in the first quarter of 2021. Paul Reeder and Edward Shapiro of PAR Capital Management are among the biggest shareholders of the airline stock owning 1.9 million shares worth $115 million.
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Disclosure: None. 10 Best Airline Stocks To Buy Today is originally published on Insider Monkey.
