The airline industry has been one of the hardest hit sectors by the COVID-19 pandemic, as travel restrictions and lockdowns severely reduced the demand for air travel. Many airlines suffered huge losses, cut costs, laid off staff and sought government support to survive the crisis. Since then, as countries across the globe pursued reopening efforts, the airline industry began to show clear signs of recovery. Starting in 2021 and extending further into 2022, travel demand rebounded dramatically, especially for domestic and leisure travel.
For investors looking for opportunities in the airline sector, three of the best airline stocks stand out from the crowd. These stocks have different business models, target other markets and segments and have unique growth prospects. But they all have one thing in common: They are well-positioned to benefit from the airline industry recovery and deliver value to shareholders.
Delta Air Lines (DAL)
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Delta Air Lines (NYSE:DAL) is one of the largest and most profitable airlines in the world, with a network of over 300 destinations across 6 continents. The airline has a diversified revenue stream, with strong positions in both domestic and international markets, as well as cargo, loyalty and ancillary services. Delta has been delivering impressive financial results since certain parts of the world began to open in 2021, despite the challenges posed by the pandemic. In 2022, the airline generated revenues of $50.6 billion, an operating income of $3.9 billion and earnings per share of $2.06. During the first half of 2023, revenue came in at $26.9 billion, operating income was $2.9 billion and earnings per share was $2.27.
In the first quarter of 2023, Delta posted a net loss due to new pilot contracts and pay raises, which the airline expects to pay off in the long run. For those who don’t recall, there were a number of stories just after the pandemic reopening about overly stressed pilots. So, I think Delta made a good move. Moreover, the airline issued positive guidance for the remainder of the year, giving investors a lot to be hopeful for in the future.
Cathay Pacific Airways (CPCAY)
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Cathay Pacific Airways (OTCMKTS:CPCAY) is the flag carrier of Hong Kong and a leading international airline with a network of over 190 destinations in more than 60 countries and territories. Unfortunately, the famed airline was already beleaguered before the global pandemic, with a host of operational inefficiencies dragging down profitability margins. As a result, Cathay underwent a transformation program to enhance its competitiveness, efficiency and customer service. The program was delivering positive results until the pandemic hit. The airline industries in Hong Kong and mainland China were hit hard during that period, with restrictions in place there longer than other countries.
Despite a slow reopening, Cathay Pacific reported record revenues of 51 billion HKD, an increase of 12% from 2021. For the first half of 2023, the airline posted 4.26 billion HKD in net income — its first profit in three years. CPCAY expects to maintain its profitability in the second half of 2023 as it benefits from the recovery of passenger and cargo demand, especially in the greater China region.
Investors looking for an international airline stock with exposure to the fast-growing Asian market and a successful transformation strategy should consider Cathay Pacific Airways.
Singapore Airlines (SINGY)
Singapore Airlines (OTCMKTS:SINGY) is the national carrier in Singapore and one of the most respected airlines in the world. The company has a reputation for excellence in service, safety and innovation. Similar to other entries on this list, Singapore Airlines benefitted from the pent-up, post-pandemic demand for air travel, especially during peak holiday seasons. SINGY lifted certain travel restrictions in early 2021 — a decision that paid off for the carrier.
Singapore Airlines delivered stellar results beginning in 2021, which extended into 2022 and 2023. In particular, the airline grew revenues by 99.5% year-over-year to 7.6 billion SGD in its 2022 fiscal year ending in March — despite pandemic challenges. Likewise, in its fiscal year 2023, Singapore Airlines generated revenue of 17.8 billion SGD, an increase of 133.4% from the previous fiscal year. Profits jumped to 2.1 billion SGD. The airline’s first quarter of its new fiscal year was also a success, implying a bright future for the airline.
Investors looking for a premium airline stock with a global presence and a proven track record of resilience and innovation should give Singapore Airlines a look.
On the date of publication, Tyrik Torres did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Tyrik Torres has been studying and participating in financial markets since he was in college, and he has particular passion for helping people understand complex systems. His areas of expertise are semiconductor and enterprise software equities. He has work experience in both investing (public and private markets) and investment banking.
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