We recently published a list of 12 Best Airport Stocks to Invest in Now. In this article, we are going to take a look at where Wheels Up Experience Inc. (NYSE:UP) stands against other best airport stocks to invest in now.
Prior to the pandemic, the travel and tourism industry contributed 10.4% of GDP (US$10.3 trillion) and 10.5% of all jobs (334 million), making it a vital sector of the global economy. The industry’s contribution to global GDP in 2023 was 9.1%, up 23.2% from 2022 and just 4.1% below 2019 levels, according to WTTC‘s most recent research. Domestic visitor expenditure increased by 18.1%, surpassing 2019 levels, while employment increased by 27 million jobs, a 9.1% year-over-year gain. Spending by foreign visitors increased by 33.1%, but it was still 14.4% less than before the outbreak.
Julia Simpson, WTTC President & CEO, on April 2024, stated:
“The future is very bright. We can predict a record-breaking 2024. The sector’s global economic contribution is set to reach an all-time high of $11.1 trillion, which will generate one in every ten dollars worldwide. The sector is also expected to support nearly 348 million jobs, an increase of 13.6 million jobs on its 2019 record. We trust that our data will support policymakers, industry professionals and individuals engaged in the evolution of travel.”
According to Fortune Business Insights, in 2024, the size of the global market for airport services was valued at $196.96 billion. The market is expected to increase at a compound annual growth rate of 14.4% from $222.26 billion in 2025 to $570.12 billion by 2032. In 2024, North America held a 28.98% market share, dominating the airport services industry. Furthermore, it is projected that the airport services market in the United States will expand considerably, reaching an estimated value of $130.37 billion by 2032. This growth will be fueled by a rise in air and passenger traffic as well as cargo transportation.
According to S&P’s report, the worldwide travel retail sector is expected to expand by 7%-10% between 2024 and 2025, greatly above the 3.3% and 3.2% growth in the global GDP in 2024 and 2025, respectively. Sales won’t approach 2019 levels until 2025, but air traffic will surpass pre-pandemic levels in 2024. Growth will be driven by Asia-Pacific, helped by better infrastructure and a growing middle class. Duty-free shopping, however, might be slowed by declining consumer confidence and fewer business tourists.
As per the aforementioned report, over the next two to four years, it is anticipated that global air traffic will increase more quickly than GDP due to growing middle classes in Asia-Pacific and, to a lesser extent, Latin America, as well as better infrastructure and connectivity. By incorporating technology, personalization, and hybrid stores that blend duty-free shopping with dining options and entertainment, travel businesses are adjusting. Customer experiences are also being improved by a move toward luxury items, fashion, electronics, and regional merchandise. More passenger time will be available for shopping because of increased digitization, remote check-in, and bag-drop services. However, sector profits are under pressure from growing airport concession fees, which have leveled off at higher levels since the pandemic. Chinese operators have secured reduced concession rates, giving them a competitive edge, even though the majority of travel shops would see a rise in expenses.
Looking ahead, according to Deloitte’s report, in 2025, travel demand is projected to be high due to post-pandemic lifestyle changes, greater freedom in working remotely, and a promising economic outlook. TSA throughput climbed by 7% year over year between December 20 and January 5 as a result of US tourists planning longer and more costly travels during the recent winter holiday season. A post-pandemic reprioritization, with 40% of travelers raising their holiday budgets because travel has become more important, and the growing trend of “laptop lugging,” where half of passengers want to work remotely while traveling, are important factors. Travel expenditure was also supported by the fact that the percentage of Americans who reported an improved financial situation jumped from 31% to 37%. Travel agencies need to adjust to new AI applications, changing global travel patterns, increased service offerings, and possible regulatory changes under a new administration to meet this demand.
An aerial shot of a busy airport, showcasing the private aviation services of the company.
Methodology
We sifted through holdings of airport services ETFs and online rankings to form an initial list of 20 airport stocks. From the resultant dataset, we chose 12 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 900 hedge funds in Q3 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s market capitalization as of February 12 for stocks that are trading under OTC.
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).
Wheels Up Experience Inc. (NYSE:UP)
Number of Hedge Fund Holders: 8
Market capitalization as of February 12: $997.87 million
In the US, Wheels Up Experience Inc. (NYSE:UP) offers private aviation services on demand. It is leading the way in data-driven and technology-driven solutions that link customers with private aircraft that have been confirmed and approved for safety. It connects private flyers to aircraft and one another via an open platform, allowing them to share life’s most essential experiences. It provides a combination of scheduled and charter options, making strategic use of its fleet of owned and leased aircraft as well as an “asset-light” charter strategy to provide a wider range of international travel options. Private aviation services is the company’s sole operational and reportable segment. Geographically, the United States accounts for the majority of the company’s revenue.
Wheels Up Experience Inc. (NYSE:UP)’s third-quarter earnings were steady, with sequentially flat revenue of $194 million. It is actively updating its fleet with more modern, efficient aircraft, such as the Challenger and Phenom, which will lower operating costs and increase operational dependability.
The business purchased a fleet of 17 Phenom aircraft from GrandView Aviation to speed up the transition process. Wheels Up Experience Inc. (NYSE:UP) will become the world’s largest supplier of on-demand Phenom aircraft as a result of this transaction. Over the following three years, it intends to gradually phase out its older jets and swap them out for the new Phenom and Challenger aircraft.
Making the switch to Embraer Phenom 300 and 300E aircraft is part of this. By doing this, three distinct fleets will be combined into one, streamlining operations and cutting expenses. They also intend to retain their King Air fleet while replacing its Citation X fleet with Bombardier Challenger 300 and 350 aircraft.
Tom Wagner And Ara Cohen’s Knighthead Capital was the largest stakeholder in the company from among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 258.13 million shares worth $624.77 million as of Q3.
Overall, UP ranks 6th on our list of Best Airport Stocks to Invest in Now. While we acknowledge the potential for UP to grow, our conviction lies in the belief that some 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 UP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.