The airline industry is a pivotal part of the economy in every major country in the world. However, airline stocks experienced one of the biggest corrections due to the COVID-19 pandemic.
In positive news, air travel has been resuming slowly and steadily in the new normal and major US indices like the Dow Jones U.S Airlines index have gained approximately 33% since August 2020.
In this blog, we will look at 7 US airline stocks that you can buy. Along the way, we will also look at the benefits and risks of investing in US airline stocks.
Important: We strongly suggest you consult a Cube Wealth Coach before investing your hard-earned money in any US stock.
Top 7 Best Airline Stocks To Invest In For 2021
American Airlines Group Inc.
Alaska Air Group
Air Transport Services Group
Delta Air Lines Inc.
JetBlue Airways Corporation
Southwest Airlines Co.
Data Source: Google
Note: All facts & figures mentioned above are accurate as of 17-02-2021 and have been taken from publicly available sources.
Top Reasons To Invest In Airline Stocks For Indian Investors
1. Air Travel Taking Off
Both business and leisure travel are on the rise across the world. According to recent statistics, the estimated number of scheduled passengers on global flights has risen from 1.79 million (post-pandemic - 2020) to 2.8 million (2021).
Experts suggest that the aviation industry may take 2-3 years to reach complete normalcy. But major airlines stocks like American Airlines Group Inc. (ticker: AAL) have been steadily gaining value since August 2020 which may be a positive for both old and new investors.
Note: All facts & figures mentioned in the above table comprise publicly available data available on Google. Download the Cube Wealth App to buy US Stocks from India starting at just $1
3. No Bankruptcies… Yet
No major US airline filed for bankruptcy, which is remarkable considering the aviation industry as a whole has been ravaged by the pandemic.
Some big players like Southwest Airlines Co. (Ticker: LUV) have announced new destinations with the view of capitalising on their competitors’ loss of revenue.
This signal of intent and supposedly healthy balance sheet may be positive for prospective Indian investors. However, it is essential to note the risks of investing in airline stocks.
Risks Of Investing In Airline Stocks
1. Impact Of COVID-19
As per news reports on CNBC, the pandemic led to heavy losses in the aviation industry that was followed by a COVID-19 stimulus package worth $900 billion.
The aviation industry saw a new record in terms of layoffs with approximately 90,000 professionals losing their jobs. However, this was followed by a $15 billion relief package to bring back furloughed workers
Even though airline stocks are recovering and growing, most of these stocks are still trading below their year-to-date margins.
2. Heaps Of Debt
Yahoo finance has reported that big players in the airline industry may not have gone bankrupt but most of them have secured large loans to stay afloat during the pandemic.
For example, American Airlines secured a loan of $5.5 billion from the US Treasury Department and Delta Airlines raised a debt of approximately $9 billion.
Thus, potential investors must analyze the balance sheet of each airline company before investing. However, you’ll have a unique advantage if you’re investing in airline stocks using Cube Wealth.
As per Investopedia, the aviation industry is primarily affected by two factors that include:
Oil Price Changes
This is fairly straightforward - fuel price dictates the operating cost of an airline. Higher the fuel price, the more an airline has to spend on fuel per flight. This will eat into the profits of an airline.
Thus, the fluctuation in fuel prices may lead to a volatile upward or downward trend in airline stock prices.
The macroeconomic risk may include increasing labour cost, natural disasters, geopolitical events, etc. Labour cost represents a large share of an airline’s operating expenses.
If the aviation industry or company experiences financial loss, they may be forced to cut costs by laying off employees. This may impact investor behaviour even though the act of laying off employees may mitigate stock volatility.
Another prominent example of a macroeconomic risk includes the COVID-19 pandemic that decimated several industries like the aviation industry.
While these risks exist in almost every industry and as a result, impact share prices, it is important to note that markets and stocks are cyclical in nature.
The US stock market has the potential to deliver profits over 3 to 5+ years. But it’s important to invest in the right stocks and sell them at the right time which is based on analysis and not intuition.
This where an expert like RIA, Rick Holbrook can help you if you’re investing using an app like Cube Wealth.
How Can Cube Wealth Help You Invest In The Best Airline Stocks?
The Cube Wealth philosophy focuses on three major factors:
1. Quality Advice
Most retail investors are busy professionals. They may not have the time to analyse the market critically enough to help them choose US stocks that can create wealth.
Moreover, your financial health may be hampered if you buy US stocks based on trends. There’s a risk that the stocks may not live up to the hype or worse, implode.
The solution? Access to quality advice from industry experts that Cube Wealth gives you access to. An expert like RIA Rick Holbrook has 40 years of experience studying the market and delivering profits for his clients.
His nuanced skills can help you invest in stocks based on your goals and risk appetite. The best part? You can get started for as little as $1. Download the Cube Wealth app to know more.
2. Long Term Investing
Stocks are long term instruments that may experience volatility in the short term. Thus, it's important to spend time in the market rather than timing the market, a popular adage that is almost always true.
3. Simplified Wealth Creation
The Cube Wealth app is simple to use. It doesn’t confuse you with complicated graphs and jargon. Your investments are visible in one simple view with dedicated Cube Wealth Coach support on WhatsApp.
Furthermore, the Cube Wealth app is reliable because it is transparent - all the fees associated with US equity investments are shown to you before you sign up.
The airline industry was severely impacted by covid due to the obvious reason - air travel restrictions. Moreover, travelers were far more cautious even when the restrictions were partially lifted.
However, the airline industry may get back to pre-covid levels by 2023 or 24 as per various projections by experts. It may be a slow climb, but recovery may still be possible with domestic travel on the rise in the US.
Thus, it's always advisable to consult an expert like RIA, Rick Holbrook on the Cube Wealth app before investing in airline stocks.
US airline stocks may present a long term wealth opportunity for Indian investors. The US market itself is strong and more capable of beating volatility due to its sheer size in terms of market cap.
There are risks as with any other investment. For instance, rising fuel prices or regulatory changes may impact the share price of big and small players in the aviation industry.
on stock picking, poring over excel sheets, financial news, analyzing market trends, tracking the Sensex, researching company fundamentals, comparing mutual funds, reading financial reports, trying to predict the future & losing your sanity!