Of all the industries impacted due to COVID-19, the airline industry was hit hardest. International Air Transport Association (IATA) estimates that airlines globally will lose at least $314 billion due to the outbreak. As a result, you’d want an Airline stocks list to look at.
The epic crash and burn in airline stock prices have left many investors wondering if now is the time to buy. Because they’ve hit rock bottom, is it even possible they can go further?
It has gotten so bad that the Oracle of Omaha completely exited his Airline positions, citing forthcoming turbulence. Around the same time, Air Canada – Canada’s biggest Carrier, released a dire quarterly report stating it would take at least three more years to reach 2019 revenue levels.
Many investors are now wondering if it’s time to buy the dip. Before committing your hard-earned capital, here are a few things to be aware of if you’re considering buying airline stocks after the 2020 market crash.
Chart by TradingView
| Symbol | Name |
|---|---|
| LUV | Southwest Airlines Co |
| DAL | Delta Air Lines, Inc. |
| JBLU | JetBlue Airways Corporation |
| AAL | American Airlines Group Inc |
| UAL | United Airlines Holdings Inc |
| ALK | Alaska Air Group, Inc. |
| SAVE | Spirit Airlines, Inc. |
| $BA | The Boeing Company |
I don’t think I should mention the elephant in the room, but the world has mostly been in lockdown. Lockdown means no one is allowed to go anywhere.
And the effects couldn’t be more apparent than in Air Canada’s most recent quarterly report. I suggest you sit down for this. In the last quarter alone, Air Canada lost a staggering $1.05 billion (yes, billion) and saw its revenue decline by $712 million.
Overall, Air Canada (TSX: AC) fell 68%, from a 52-week high of $52.71 to a low of $9.27 and remains down. As of the time this blog post was written, AI was trading at $20.29.
Our Airline stocks list looks at other Airlines as well. If you’d like to discuss the moves Airlines are making, check out our trading room.
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One Airline Stock Bucking the Trend
It’s not all doom and gloom, however. One airline company, Cargojet (TSX: CJT), increased its revenue despite the pandemic.
As you probably figured out by the name, Cargojet transports cargo (goods), not people. Not only has Cargojet survived this global crisis, but they’ve also thrived, realizing a 12% revenue increase last quarter. If that wasn’t enough, they saw a 51% increase in gross margin and a 24.5% increase in adjusted earnings. You can thank e-commerce for that.
What else is someone going to do while stuck at home? Shop, of course. How long will Cargojet sustain these revenues? Your guess is as good as mine, but we’d likely see a decline once stores open up.
Investing in Airline Stocks
Balance Sheet Strength
Balance sheets are important for many reasons. A balance sheet shows the company’s assets and liabilities at a certain time.
As a potential investor, you need to consider the financial stability of a company. You want to ensure the company is making money, protecting the money it’s making, and not hemorrhaging it.
“The Numbers Don’t Lie”
Airline Stocks Balance Sheet
As you can see in the image above, Southwest and JetBlue lead the pack regarding the strength of their balance sheets. Coming in at a close 3rd is Alaska.
By contrast, American Airlines carries the biggest debt load and is the least profitable airline in the industry. Although they have a substantial cash reserve, I’d be concerned as a shareholder if the skies don’t open up come summer.
Along the same token, Southwest Airlines, JetBlue Airways, and Alaska Air all have at least a billion in the bank to access if needed. Take Southwest, for example; their liquidity equals 28% of their 2019 revenue. Likewise, JetBlue is 22%, while Alaska has 23%.
In short, even though Southwest, JetBlue, and Alaska could experience short-term losses, they should have enough capital to weather the COVID-19 storm.
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What Airlines Are Publicly Traded?
- The Airline stocks list with publicly traded stocks are as follows:
- $LUV
- $DAL
- $AAL
- $UAL
- $SAVE
- $ALK
- $SKYW
- $JBLU
Airline Stocks Soaring in Price
We got some positive news as of late. Airline stocks soared in price last week, with shares of American Airlines rising 41% to close at $16.72.
To put that in perspective, that’s their biggest one-day percentage gain since their merger with US Airways in 2013. Even though the shares are still down 42%, it looks promising nonetheless.
Industry analysts point to their aggressive plans to operate 55% of their flights from July 2019 for the spike. Considering this is a considerable increase over the 20% they ran in April and May, I would tend to agree.
On the other hand, United Airlines had a slightly less aggressive approach, resuming about 130 nonstop routes. With this came a 16% rise in share price at the close. Both will be running much smaller operations than their competitors.
Check out our live trade made on American Airlines.
Final Thoughts
The question remains: Is it time to buy the dip on an airline stocks list? Even though it appears the airline industry has crashed, people still want and need to travel far and wide.
Unless we invent some miraculous time travel device, they will be using airplanes to do so. Once the global travel bans are lifted, people will scramble to hop on a plane. Eventually, in response to the soaring demand, stock prices will recover, and all will be well.
Although it may be quite tempting to get in on the low prices, reaching the all-time highs the airline industry got so used to may take a while.
Buying airline stocks right now is safe if you understand the risk. Only time will tell when the skies will be reopening fully. It’s best to stick to top operators with strong balance sheets.
They have the best chance of surviving if something goes wrong in the vaccine chase and the pandemic is with us longer than we hope.
