13th May 2022
2020 was arguably one of the worst years ever for airline stocks, with airline, cruise, and hotel stocks losing millions of dollars in revenue. In 2020, 80% of flights were canceled, revenues plummeted by an estimated 60%,1 and global air passenger volume fell 64%.2
For some investors, this signaled the moment to get out of travel stocks. But for others, it was the beginning of a travel stock buying spree in anticipation of a rebound.
Travel stocks can’t be kept down
The last 12 months or so have shown that the appetite for vacations can’t be suppressed for long. As vaccinations rolled out and governments reopened their borders, the “revenge travel” movement built its momentum.
After months of being restricted to their own city and separated from loved ones who live overseas, people are eager to travel. Exotic vacations, reunion travel, wilderness and nature experiences, nostalgia travel, dream vacations, and more are combining to the extent that Expedia analysts dubbed 2022 the year of the GOAT — Greatest Of All Trips.3
Even Omicron couldn’t destroy the air travel revival. According to analysts, every time bookings drop because of a new variant, it’s followed by an even greater surge when infection rates fall again.4 IATA expects that total passenger numbers will rise from 2.3 billion in 2021 to 3.4 billion in 20225, and the International Travel and Health Insurance Journal (ITIJ) forecasts that 2022 will see international travel spending rise 94%.6
Airlines are learning the lessons of the pandemic
While road trips in private vehicles are seen as more safe and hygienic, air travel is keeping pace. Leading airlines seized the moment while business was slow to push through their digital transformation, implementing contactless check-in, boarding, and in-flight entertainment and meal orders, all to increase customer confidence.
Meanwhile, airline companies are integrating data analytics to better understand the preferences of the post-covid flier, and are putting insights to work to improve their offerings. As a result, IATA predicts that airlines will return to profitability by 2023.7
This proactive initiative is helping reassure travel stock investors as much as travelers themselves. Some savvy investors saw the 2020 airline stock crash as a prime opportunity to snap up what they perceived as the best airline stocks at low prices.
If you’re considering joining them, we’re here to help. Although it’s impossible to predict which are the best airline stocks to buy at any given time, we’ve gathered 5 that look promising to help you make your decision.
1. Defiance Travel ETF (CRUZ)
If you’re convinced that the travel sector will recover, but you’re not sure which travel stocks will be part of that recovery, a travel ETF is a great option. It’s difficult to select just a few best travel stocks to buy, and concentrating investment in only a handful of stocks raises the risks.
A travel or airline ETF like Defiance’s CRUZ offers broad exposure to a wide range of airlines, as well as hotels, cruise lines, and other travel stocks, helping mitigate your exposure to the risk of owning just one or two stocks while allowing you to benefit from the rising travel market.
CRUZ seeks to track the BlueStar Global Hotels, Airlines, and Cruises Index, a rules-based weighted index of companies in hotel, air travel, and cruise industries. CRUZ has an expense ratio of 0.45% and is currently trading at $19.32.8
2. Delta Airlines Inc (DAL)
Arguably America’s leading business and premium class airline, Delta is widely seen as a “buy” stock. The last few months have seen significant improvements. Despite losses, Delta has a stable balance sheet, good labor relations, and an extensive business travel route network.
Q4 2021 saw Delta earning 22 cents per share, up from a loss of 2.53 the previous year and ahead of estimates of 15 cents per share. While revenue remained below pre-pandemic levels, it rose 138% to $9.47 billion, topping analyst expectations. Delta anticipates the return of business travelers in the near future and says that leisure demand remains solid, predicting that March 2022 will be its first return to profitability.9
Delta is currently trading at $34.52.10
3. American Airlines Group (AAL)
The US’ biggest air network and with strong ties to European partners, American Airlines is well placed to grow as the travel sector recovers. In a recent call, company officials announced that the airline is actively looking to build more partnerships, with an agreement with JetBlue already confirmed11. Despite holiday flight cancellations, the stock ended the year up 13.95%12
American’s reputation as a low-cost airline is serving it well, as people want to return to travel but have small budgets. 2021 saw it return to profitability, with revenue up more than 360% to $7.48 billion, and earnings climbing over 100% to $0.03 per share, both figures which beat analyst expectations. As a result, many analysts see its current low price as an opportunity for profit, not a sign of danger.13 American is currently trading at $14.59.14
4. United Airlines Holdings (UAL)
United Airlines worked hard to cut costs and maximize liquidity in 2020, with the result that 2021 saw it with $19.7 billion available to prepare for recovery.15 United has the advantages of a big domestic network, strong operations in Asia, and a large presence in key business markets.16 It’s also leading the way in the switch to green energy, boosting its reputation among eco-friendly travelers.
The most recent financial report showed strides towards profitability, with revenues climbing over 270% to $5.47 billion in Q2. While the company is still reporting a loss, net losses shrunk more than 73% YOY (year on year) and net profit margins rising over 92%.17 United believes that it’s on track to outpace its 2019 performance by 2023.18 United is currently trading at $36.71.19
5. Alaska Air Group (ALK)
Alaska is one of the US’ smaller airlines, with 5% of the market, but it drew investor attention for its swift recovery after the COVID-19 crash. Last quarter, the company beat analyst expectations and reported $1.53 billion in revenue, a rise of 262.71% YOY; $397 million in net income, up 285.51% YOY; and $3.13 earnings per share, up more than 279% YOY. It also delivered net profit margins of over 150% and a jump of 93% in operating income20.
Alaska is helped by its positive reputation, consistently ranking in the top 3 for low airfare, best on-time arrival rates, highest customer satisfaction, best baggage handling, and best frequent flier program.21 Alaska is currently trading at $49.14.22
For current performance and holdings, please visit defianceetfs.com/CRUZ
1 “Back to the future? Airline sector poised for change post-COVID-19” April 2, 2021 https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/back-to-the-future-airline-sector-poised-for-change-post-covid-19
2 “Will airline hubs recover from COVID-19?” November 5, 2020 https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/will-airline-hubs-recover-from-covid-19
3 “The GOAT mindset: Expedia reveals 2022’s biggest travel trend” November 30, 2021 https://www.prnewswire.com/news-releases/the-goat-mindset-expedia-reveals-2022s-biggest-travel-trend-301433866.html
4 “Omicron variant unravels travel industry’s plans for a comeback” December 1, 2021 https://www.business-standard.com/article/current-affairs/omicron-variant-unravels-travel-industry-s-plans-for-a-comeback-121120101201_1.html
5 “Economic Performance of the Airline Industry” 2021 End-year Report, IATA https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance—october-2021—report/
6 “Rise in international travel spending forecast for 2022” December 1, 2021 https://www.itij.com/latest/news/rise-international-travel-spending-forecast-2022
7 “Economic Performance of the Airline Industry” 2021 End-year Report, IATA https://www.iata.org/en/iata-repository/publications/economic-reports/airline-industry-economic-performance—october-2021—report/
9 “Airline Stocks: Delta Earnings Top, 2022 Profit Seen Despite Omicron Surge” January 13, 2022 https://www.investors.com/news/airline-stocks-delta-earnings-due-amid-omicron-surge-labor-crunch/
11 “Investing in Airline Stocks” February 2, 2022 https://www.fool.com/investing/stock-market/market-sectors/industrials/airline-stocks/
12 “4 Airline Stocks To Watch in 2022” January 4, 2022 https://www.gobankingrates.com/investing/stocks/best-airline-stocks-to-invest-in/
13 “8 Best Airline Stocks to Buy in 2022” January 10, 2022 https://www.moneycrashers.com/best-airline-stocks/
14 Accessed March 7, 2022 https://www.google.com/search?q=american+airlines+stock+price&ei=aZElYs2NC4KalwTQ2ZfICw&oq=delta+stock+price&gs_lcp=Cgdnd3Mtd2l6EAMYADIHCAAQRxCwAzIHCAAQRxCwAzIHCAAQRxCwAzIHCAAQRxCwAzIHCAAQRxCwAzIHCAAQRxCwAzIHCAAQRxCwAzIHCAAQRxCwAzIHCAAQsAMQQzIHCAAQsAMQQzIHCAAQsAMQQzIHCAAQsAMQQzIKCAAQ5AIQsAMYADIKCAAQ5AIQsAMYADIKCAAQ5AIQsAMYADIPCC4Q1AIQyAMQsAMQQxgBMg8ILhDUAhDIAxCwAxBDGAEyDwguENQCEMgDELADEEMYATIPCC4Q1AIQyAMQsAMQQxgBSgQIQRgASgQIRhgBUABYAGDYDGgCcAF4AIABAIgBAJIBAJgBAMgBE8ABAdoBBggAEAEYCdoBBggBEAEYCA&sclient=gws-wiz
15 “4 Airline Stocks To Watch in 2022” January 4, 2022 https://www.gobankingrates.com/investing/stocks/best-airline-stocks-to-invest-in/
16 “Investing in Airline Stocks” February 2, 2022 https://www.fool.com/investing/stock-market/market-sectors/industrials/airline-stocks/
18 “4 Airline Stocks To Watch in 2022” January 4, 2022 https://www.gobankingrates.com/investing/stocks/best-airline-stocks-to-invest-in/
19 Accessed March 7, 2022 https://www.google.com/search?q=united+airlines+stock+price&ei=8ZglYr6mLcjUgQaVq7TwBw&ved=0ahUKEwj-4vqHo7P2AhVIasAKHZUVDX4Q4dUDCA4&uact=5&oq=united+airlines+stock+price&gs_lcp=Cgdnd3Mtd2l6EAMyBQgAEIAEMgYIABAHEB4yBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEMgUIABCABDoHCAAQRxCwAzoHCAAQsAMQQ0oECEEYAEoECEYYAFDrBli3DmCUEGgCcAF4AIABogGIAYcIkgEDMC43mAEAoAEByAEKwAEB&sclient=gws-wiz
20 “8 Best Airline Stocks to Buy in 2022” January 10, 2022 https://www.moneycrashers.com/best-airline-stocks/
21 “8 Best Airline Stocks to Buy in 2022” January 10, 2022 https://www.moneycrashers.com/best-airline-stocks/
22 Accessed March 7, 2022 https://www.google.com/search?q=alaska+airlines+stock+price&ei=E5MlYtvEAZKhgQb3z7SIBg&ved=0ahUKEwibmrS7nbP2AhWSUMAKHfcnDWEQ4dUDCA4&uact=5&oq=alaska+airlines+stock+price&gs_lcp=Cgdnd3Mtd2l6EAMyBQgAEMQCMgUIABCABDIFCAAQgAQyBQgAEIAEMgUIABCABDIFCAAQgAQyBQgAEIAEMgQIABAeMgQIABAeMgQIABAeOgcIABBHELADOgcIABCwAxBDOgYIABAHEB46BAgAEA1KBAhBGABKBAhGGABQ2QZY6wtgyBFoAnABeACAAfMBiAHJCZIBBTAuNS4ymAEAoAEByAEKwAEB&sclient=gws-wiz