Aviation stocks fly high as government lifts domestic airfare caps
ATF prices have also decreased during the past few weeks after reaching record highs.
On Thursday, after the Civil Aviation Ministry announced that domestic airfare limitations will be lifted, demand for aviation equities was high.
After around 27 months, the Union Aviation Ministry said on Wednesday that restrictions on domestic airfare would be lifted as of August 31.
InterGlobe Aviation’s stock rose from its opening price of 2,070.05 to a high of 2,080.80, an increase of 2.09% from its previous close.
SpiceJet Ltd. started trading at 46.05 before rising as much as 6.80% to 47.90 per share.
After carefully examining daily demand and air turbine fuel prices, it was decided to remove airfare caps. Aviation Minister Jyotiraditya Scindia stated on Twitter that “stabilization has taken hold and we are confident that the sector is prepared for development in domestic traffic in the near future.”
The Russia-Ukraine war, which started on February 24, has been a significant factor in the decline in ATF prices over the past three weeks after they spiked to record heights.
ATF cost 1.21 lakh rupees per kilolitre on August 1 in Delhi, which is around 14% less than it did the previous month.
After a two-month lockdown due to the COVID-19 pandemic, services resumed on May 25, 2020, with lower and maximum limits on domestic airfares based on flight times.
The Civil Aviation Ministry issued the following directive on Wednesday: “With effect from August 31, 2022,” it has been decided to abolish the fare bands that have been periodically advised on airfares. This decision was made after reviewing the existing status of scheduled domestic operations in relation to passenger demand for air travel.
Aviation stocks fly high as govt to lift domestic airfare caps from Aug 31
InterGlobe Aviation’s stock rose 2.09 percent over its previous closing after rising from Rs 2,070.05 to Rs 2,080.80 during the day.
On Thursday, after the Civil Aviation Ministry announced that domestic airfare limitations will be lifted, demand for aviation equities was high.
After around 27 months, the Union Aviation Ministry said on Wednesday that restrictions on domestic airfare would be lifted as of August 31.
InterGlobe Aviation’s stock rose 2.09 percent over its previous closing after rising from Rs 2,070.05 to Rs 2,080.80 during the day.
SpiceJet Ltd. started trading at Rs. 46.05 before rising as high as 6.80% to Rs. 47.90 per share.
“After carefully examining daily demand and air turbine fuel prices, it was decided to remove airfare caps (ATF). The market has stabilized, and we are confident that domestic traffic will increase in the near future “Jyotiraditya Scindia, the minister of aviation, stated on Twitter.
ATF prices have been declining in recent weeks after surging to record highs, largely as a result of the Russia-Ukraine war that started on February 24.
ATF cost Rs. 1.21 lakh per kilolitre on August 1 in Delhi, which is around 14% less than it did the previous month.
After a two-month lockdown due to the COVID-19 pandemic, services resumed on May 25, 2020, with lower and maximum limits on domestic airfares based on flight times.
The Civil Aviation Ministry announced in a directive on Wednesday, “With effect from August 31, 2022, it has been decided to remove the fare bands notified from time to time regarding the airfares after reviewing the current status of scheduled domestic operations in relation to passenger demand for air travel.”
Top Airline Stocks for Q3 2022
ATSG is the best for growth and performance, while GOL is the best for value.
Companies that provide a range of air transportation and travel services for passengers and freight make up the airline sector. Transportation by air, leasing of aircraft, hotel and automobile reservations, and trip management services are among the available options. Southwest Airlines Co., Delta Air Lines Inc., and United Airlines Holdings Inc. are some well-known names in the aviation sector.
Air travel was all but stopped by the COVID-19 epidemic. The effects of the pandemic are starting to dissipate, though, and it is roaring back. This year, more flights for both business and pleasure than before the outbreak.
The U.S. Global Jets ETF (JETS), an airline exchange-traded fund, represents airline companies, which have significantly underperformed in the overall market. Over the last 12 months, JETS has generated a total return of -25.6%, which is less than the total return of the Russell 1000 Index, which was 1.6%.
Here are the top three airline stocks in terms of performance, growth rate, and valuation. All statistics in the tables below and the market performance figures above are as of June 2, 2022.
These airline stocks had the lowest price-to-earnings (P/E) ratio over the past 12 months. Because dividends and share buybacks are two ways that earnings can be distributed to shareholders, a low P/E ratio indicates that you are paying less for each dollar of profit made.
- Gol Linhas Aéreas Inteligentes SA and Gol Intelligent Airlines Inc. Brazil is the home of Gol Intelligent Airlines. Both business and leisure travelers can take use of its low-cost domestic and international airline services. The business also has a loyalty scheme. Paulo Kakinoff, the current chief executive officer (CEO), will leave his job and join the board of directors, according to a mid-May announcement from Gol. Starting on July 1, 2022, Vice President of Operations Celso Ferrer will take his place.
- Air Transport Services Group Inc.: This company offers services for both freight and passenger air transportation as well as aircraft leasing. Additionally, it provides comparable services to both domestic and international airlines. Early in May, the company released its financial results for Q2 of its 2022 fiscal year (FY), which covered the three months that concluded on March 31, 2022. Compared to the same quarter last year, net earnings increased by 22.7% on an increase in revenue of 29.2%. The corporation said that all of its operations were at pre-pandemic levels.
- Alaska Air Group Inc.: Alaska Air Group provides airline services through its subsidiaries Alaska Airlines and Horizon Air. Customers are served by the business throughout North America and Costa Rica along with its local partners.
- These are the top airline stocks according to a growth model that gives firms points based on a 50/50 weighting of their most recent quarterly YOY EPS growth and quarterly YOY percentage sales growth. The success of a corporation depends on both sales and profits. Due to this, evaluating businesses based on just one growth indicator leaves rankings open to accounting irregularities of the quarter (such as changes in tax law or restructuring charges), which could render one or both figures unrepresentative of the business as a whole. As outliers, businesses with quarterly EPS or revenue growth of greater than 2,500% were disqualified.
The company profile for Air Transport Services Group Inc. can be seen above.
Ryanair Holdings PLC: Ryanair Holdings is an ultra-cheap airline with its headquarters in Ireland. It offers point-to-point, short-haul flights across Europe and to a few locations in Africa and the Middle East. Ryanair did not have an EPS growth number in the table above because its EPS was negative.
SkyWest Inc.: SkyWest provides airline services through SkyWest Airlines, a subsidiary, and aircraft leasing services through SkyWest Leasing, a subsidiary. The business offers flights to locations around North America. Late in April, SkyWest released its financial results for Q2 FY 2022, which covered the three months ending March 31, 2022. Despite a 37.5% increase in revenue over the same quarter last year, net income dropped by 50.6%.
Airline Stocks with the Best Performance
Out of all the firms we looked at, these airline stocks had the best returns or the least drops in total return during the last 12 months.
Inc.
- Air Transport Services: See the company described above.
- Copa Holdings SA: Based in Panama, Copa Holdings offers passenger and freight air transportation services. The company operates regular flights to the Caribbean, Central, and South American nations, and vice versa.
- Vuela Controladora Aviation company SAB de C.V.: Vuela Controladora Compaa de Aviación, usually referred to as Volaris, is a low-cost airline company located in Mexico that provides passenger air transportation. The organization primarily caters to cost-conscious businesses and vacationers heading to Mexico, the United States, and Central and South America. Late in April, Volaris released its financial results for Q1 FY 2022, which covered the three months that concluded on March 31, 2022. Despite an increase in revenue of 80.0%, the company’s net loss increased to $49 million from $36 million in the corresponding period last year. According to Volaris, rising fuel prices, which have increased since Russia’s invasion of Ukraine, are to blame for greater operating costs.
The views, opinions, and analyses shown here are for informative purposes only and should not be regarded as recommendations for individual investors to buy any particular security or use any particular investment strategy. Although we think the data shown here are trustworthy, we do not guarantee its correctness or comprehensiveness. The opinions and tactics we discuss in our content might not be appropriate for all investors. All views, opinions, and analyses in our content are given as of the date of publishing and are subject to change at any time because the market and economic situations are dynamic. The information is not meant to be a thorough examination of all relevant information pertaining to any particular nation, area, market, sector of the economy, investment, or strategy.
Compete Risk Free with $100,000 in Virtual Cash
Utilize our FREE Stock Simulator to put your trading abilities to the test. Trade your way to the top while competing against hundreds of other Investopedia traders! Before risking your personal money, place trades in a virtual environment. Practice your trading techniques so that you will have the necessary experience when it comes time to enter the real market.
Best Airline Stocks to Buy This Year
Don’t allow the rising cost of fuel and new COVID-19 concerns to scare you away from these aviation stocks.
It might seem odd to think about the best airline stocks to buy right now. Gas prices are soaring after being battered by the COVID-19 pandemic, with jet fuel prices rising by more than 126% in a year. The exchange-traded fund (ETF) tracking the airline sector, U.S. Global Jets ETF (ticker: JETS), fell 9.3% between April 18 and May 18. However, despite the epidemic and rising fuel prices, people still need and desire to fly, thus airline stocks can continue to prosper in the long run. The fact that airlines like Delta have reported relatively flat revenue despite a 120% sequential quarterly increase in COVID-19 cases this year, according to Morningstar analyst Burkett Huey “shows that, compared to previous quarters, consumer travel is significantly less susceptible to COVID-19. “These are eight of the greatest airline stocks to purchase for 2022 if you’re ready to endure some short-term setbacks in exchange for possible long-term gains.
Southwest Airlines Co. (LUV)
Southwest Airlines is the industry leader thanks to its excellent low-cost business model and strong bank sheet. The business has two key advantages over its competitors. First off, among the major American carriers, it has one of the finest credit ratings. At the end of 2021, it had around $12.5 billion in cash and cash equivalents on hand. Southwest did not have to significantly erode its equity or issue a significant amount of debt during the crisis. Because their stock prices haven’t yet recovered from pandemic-related losses, it’s simple to assume weaker competitors like American Airlines Group Inc. (AAL) are “cheap.”
United Airlines Holdings Inc. (UAL)
United Airlines reported first-quarter 2021 revenue of $7.6 billion. Huey claims that greater yield and capacity projections can offset the impact of higher oil prices to retain a fair value estimate of $57 per share, even if this is still 21% less than first-quarter revenue from 2019, before the pandemic. As the leading U.S. airline with the most worldwide focus, United may find it more challenging to recover from the epidemic than other domestic carriers.
However, Huey anticipates that this will benefit the airline as global traffic surges ahead into 2023. Huey continues, “We think United has considerably greater regulatory uncertainty than peer carriers due to its increased exposure to international travel, and we think summer 2022 will be a critical test of international travel recovery for United,” despite the fact that the airline seems to be on the rise.
Alaska Air Group Inc. (ALK)
Mid-sized airline Alaska Air has its main hub in Seattle. Prior to the pandemic, shares were selling for around $70 each, then for about $55 in the summer of 2021, and are currently worth about $47. This isn’t because ALK had a particularly rough time during the epidemic; rather, it’s because carriers like Americans had to take on more debt and dilution in order to survive. But it seems like the market is suddenly penalizing Alaska for its destinations.
Along with its namesake state, Alaska also provides considerable service to California and Hawaii. Due to severe local COVID-19 restrictions, markets like Hawaii have taken longer to recover. But at this time, the market might be ignoring ALK. Historically, the airline has had a management that is above average and well-run operations. While there will be a temporary weakness in tourist markets like Hawaii, ALK’s solid corporate culture should endure. Additionally, the airline is updating its fleet, which should result in significant fuel savings in the future.
Delta Air Lines Inc. (DAL)
One reason Delta is among the best airline stocks to buy now is simple: The company entered the pandemic with the strongest balance sheet of the big three legacy carriers. United Airlines’ financials were in merely average shape, while America was in the direst condition of the bunch. Coming out of the pandemic, Delta has a solid edge over United in terms of competitive positioning. United was arguably slow to add back flights at its key hubs. This gave ample room for discounters such as Southwest and JetBlue Airways Corp. (JBLU) to attack United at its main bases of operation.
In contrast, Delta has expanded its market share in Los Angeles, kept a firm hold on New York, and operates a virtual empire out of Atlanta. Huey asserts that Delta outperformed the most recent FactSet sales estimate by 6.5% and has been successful in passing along the increase in fuel prices and pay inflation to consumers. Delta has a good chance of restoring pre-pandemic levels of prosperity among the major three legacy carriers.