Positive news around Covid-19 vaccines has been very exciting for airline stocks of late, which have been hammered by the pandemic.
Yes, people are flying domestically once again. And some countries are willing to open their borders to Americans. But all in all, most countries have shut their borders until the novel coronavirus pandemic is better under control, even as the virus makes its way to far-flung corners of the globe.
The point is, air travel is not back. Aside from the significant travel restrictions, there are daunting logistical issues. Beyond the flight, travelers have to move about in a new place, staying in hotels and eating in restaurants, especially now that it’s getting colder. And the pending approval of Boeing’s (NYSE:BA) star-crossed 737 MAX isn’t helping things either.
Here are 7 top airline stocks that can’t get airborne:
- United Airlines (NYSE:UAL)
- Hawaiian Holdings (NYSE:HA)
- Delta Airlines (NYSE:DAL)
- Southwest Airlines (NYSE:LUV)
- Spirit Airlines (NYSE:SAVE)
- Copa Holdings SA (NYSE:CPA)
- GOL Linhas Aereas Inteligentes (NYSE:GOL)
These airline stocks may rebound when the worst of this mess is over. But for now, the downside risk, especially in the U.S., is still significant.
United Airlines (UAL)
Once one of the top airlines in the U.S., United Airlines has seen both its market share and its brand suffer in recent years. And as for most airlines, the pandemic was the final straw.
No matter how low oil prices go, or how efficient you can make your fleet or services, if people aren’t flying, you’re losing money.
Richard Branson, the former owner of Virgin Air and numerous other Virgin brands once said, “If you want to be a millionaire, start with a billion dollars and then buy an airline.”
That’s the state of making money in the airline industry. And that was in good times.
Each airline has its particular challenges. Big airlines like UAL are so big that a global lockdown is brutal. Granted, their size means they can hedge their fuel prices and buy cheaper than smaller carriers, but that becomes a moot point in the pandemic.
The stock is off 60% in the past year and while stable here, isn’t worth the risk.
Hawaiian Holdings (HA)
In early September, Hawaii reinstated a 14-day quarantine for passengers heading from the island of Oahu to Maui, Kauai and Hawaii. That means if you head to Hawaii from the U.S., you have to expect your first two weeks aren’t going to be enjoying the sights.
But the one thing HA has going for it is its freight business. It has routes to other islands and to the mainland. E-commerce is alive and well in Hawaii, so this piece of the business should help keep revenue coming in.
The stock is down 44% and is going to move about as far as its planes until the pandemic subsides.
Delta Airlines (DAL)
The second largest U.S. air carrier by market cap, DAL rose above the competition in the 2010s as other big carriers were struggling. It was also a major transporter of troops to Iraq and other Middle East posts, which was good business at good margins.
This is also a very cost-conscious airline that didn’t let its large size change its desire to keep costs at a minimum. It was one of the first airlines to add a baggage fee and remains one of the strictest with regards to carry-on bag policy.
But keeping costs down can’t get you out of a pandemic. And its global routes that it expanded in the past decade only made this carrier more vulnerable as the pandemic grew — and stayed.
As with the other big carriers, even dividends are a thing of the past. The stock is down nearly 40% and we’re headed into an ugly winter season, typically a big travel time for airlines.
Southwest Airlines (LUV)
The largest U.S. airline by market cap, Southwest Airlines is suffering similar problems to DAL and UAL (and everyone else in the industry).
The best news for LUV is the fact that the grounding of all 737 MAX planes took place during the pandemic. LUV flies the 737 almost exclusively. At least the collapse of air travel meant LUV didn’t need all its planes.
But aside from that cold comfort, there’s little else. Just this week the airline said it’s seeing a deceleration of revenue in November and December (holiday months) due to the resurgence in COVID-19 cases in the US.
Capacity was down 65% from year ago levels. Revenue is expected to be down 65% in November and December from year ago levels.
Yet LUV is one of the better performing airline stocks, likely due to the fact that it has a lighter footprint at less expensive airports, so it pays less gate fees than hub-focused competitors.
Spirit Airlines (SAVE)
Once a trucking company, then a tour company, SAVE is now the No. 8 airline in the U.S. Its niche is the ultra-low-cost travel sector, and it has flights around the U.S., Caribbean and Latin America.
With a $1.7 billion market cap, this is a pretty small player. While its market is well-defined and it has built some very solid routes, the pandemic rules all air travel inside and outside the U.S.
Also, given that many of its passengers are price-conscious holiday travelers, that market is especially vulnerable to a downturn as holiday seekers look for safer alternatives closer to home.
The stock is off 53% year to date and will have to slog through a tough holiday season.
Copa Holdings SA (COPA)
Remember Pan Am? COPA (Compañia Panameña de Aviacíon) was formed by a handful of Panamanians in 1944. Pan Am had a 32% stake in the freight and passenger airline that served the Caribbean, Latin America and the US.
It has evolved since then, but continues to be a significant carrier in the region. It has a nearly $3 billion market cap and its business is sustained with its freight operations while the pandemic rages throughout most of its destinations.
But this company has built a good niche and isn’t as prone to overexposure as many larger carriers. The stock is off 37% in the past year, but may well be the best of a beaten group.
GOL Linhas Aereas Inteligentes (GOL)
This Brazilian airline launched in 2001 and has been doing very since its entry into the market. GOL focuses on Brazil, South America and the Caribbean.
The airline has expanded its position in the domestic Brazilian sector via acquisitions of weaker rivals and has become a major player on that continent.
Its current fleet is all Boeing 737s, with a pending order for 93 new 737 MAXs. Again, while problems with the new plane is an obstacle for growth, growth is the least of GOL’s challenges right now.
As a relatively young carrier in a market that is pretty economically volatile, GOL has a lot of risk exposure. Also, given the Brazilian government’s reaction (or lack thereof) to the pandemic, this is a new risk to the company recovering business moving forward.
The stock is off 57% year to date and may have the toughest path back to cruising altitude.
On the date of publication, Louis Navellier has no long positions in any stocks in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.