We recently published a list of 11 Best Airline Stocks to Buy Now. In this article, we are going to take a look at where SkyWest, Inc. (NASDAQ:SKYW) stands against other best airline stocks to buy now.
The global airline industry was hit worse than most other industries by the COVID-19 pandemic. According to McKinsey, the industry’s revenue in 2020 was $328 billion, representing a revenue loss of more than $370 billion over 2019. However, the industry has progressively rebounded in recent years and is expected to rise steadily as international travel returns worldwide.
Back in 2023, the aviation value chain seemed encouraging compared to a couple of years prior. Jet fuel manufacturers, who profited from higher gasoline prices, and freight forwarders, having continued to enjoy robust air cargo demand, made the most money. On the other hand, airports, airlines, and OEMs faced the biggest losses in absolute terms. That said, the aggregate results, boosted by the continued recovery in air travel, were a substantial improvement over 2022, when economic losses across the entire chain reached almost $67 billion. On that front, McKinsey stated that 9 of the 11 subsectors the firm analyzed did better in 2023 than in 2022, and 6 of the 11 performed better than in 2019. Furthermore, according to a UN Tourism study released in January 2024, international tourism reached 88% of pre-pandemic levels in 2023 and was on course to rebound to levels before the pandemic.
Airline Industry Outlook
The US airline sector began 2025 operating at greater than pre-pandemic levels, with demand showing a strong rebound in 2024 and early 2025. According to Bain & Company’s Q1 2025 air travel forecasts, annual air travel demand has surpassed 2019 totals based on revenue passenger kilometers. This recovery marked a significant milestone, with 2024 travel demand surpassing 102.6% of 2019 levels. However, new data shows that this trend seems to have reversed on account of heightened inflation and safety concerns. The market has already begun reflecting this change, with the S&P 500 passenger airline index down about 20.8% year-to-date.
All that said, the future holds a bit more promise. By 2030, the US is expected to replace the UK as the world’s largest outbound travel market, thanks to a spike of 21 million extra visitors between 2024 and 2030. Meanwhile, China is expected to reclaim its position as the third-largest outbound travel market, up from 7th place in 2024, with an increase of more than 26 million travelers. Furthermore, the Airports Council International (ACI) predicts that global passenger traffic would rise at a compound annual growth rate of 3.4% between 2024 and 2043, reaching 17.7 billion people. By 2045, these numbers are predicted to increase to 18.7 billion, nearly double those in 2024. Looking even beyond that, passenger traffic is expected to hit the 22.3 billion mark by 2053, about 2.4 times the 2024 prediction.
Our Methodology
For our list of the 11 best airline stocks to buy, we noted down stocks that were involved in the airline industry and then selected the top 11 companies that operated in that space. We used ETFs, financial media reports, and stock screeners to compile a preliminary list. We arranged the chosen companies in ascending order of hedge fund ownership as of Q4 2024.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A commercial plane flying overhead with a scenic view of the region in the background.
SkyWest, Inc. (NASDAQ:SKYW)
Number of Hedge Fund Holders: 34
SkyWest, Inc. (NASDAQ:SKYW) is a regional airline company in the US with a varied portfolio, including SkyWest Airlines, SkyWest Charter, and SkyWest Leasing. The company boasts a fleet of over 500 aircraft, linking travelers to over 240 destinations. Furthermore, the company rents aircraft to other operators through SkyWest Leasing, which increases its income possibilities.
SkyWest, Inc. (NASDAQ:SKYW) reported earnings per share of $2.34 in Q4 2024, considerably above expert expectations of $1.80. Revenue totaled $944 million, above the average estimate of $907.54 million, indicating a 26% rise from $752 million in the same period the previous year. Moreover, the company’s block hour output increased by 20% year-over-year in Q4, indicating improved captain availability compared to the prior year quarter.
In addition, the company announced a contract renewal with American Airlines for 74 CRJ700 aircraft over a multi-year period. On that front, 16 additional E-175s are planned to arrive between 2025 and 2026, allowing SkyWest, Inc. (NASDAQ:SKYW) to operate a total of 278 E-175s by 2026.
ClearBridge Small Cap Value Strategy stated the following regarding SkyWest, Inc. (NASDAQ:SKYW) in its Q2 2024 investor letter:
“We also added a new position in SkyWest, Inc. (NASDAQ:SKYW), a regional airline operator. The company reported strong quarterly earnings as its pilot attrition declines and fleet utilization improves. We believe that SkyWest continues to find opportunities to deploy capital in a value-accretive manner, acquiring more planes under long-term contracts. We think earnings should hold up in a potential recession and perhaps even improve further if major airlines reduce capacity and more pilots become available for SkyWest.”
Overall, SKYW ranks 5th on our list of best airline stocks to buy now. While we acknowledge the potential of SKYW as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SKYW but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
