Airline Stocks: As Americans Return to the Skies, Make This Trade

Sunday, November 29 — the end of the Thanksgiving travel window — was the busiest day for U.S. air travel since mid-March when the COVID-19 pandemic took hold.

a close-up shot of an airplane engine

Source: Shutterstock

Transportation Security Administration agents screened 1.17 million people that day. According to the TSA, that was its biggest day since the coronavirus gutted air travel.

And despite COVID case and death numbers on the rise again, they’re expecting more big spikes during the upcoming Christmas travel season.

Still, travel remains way down from where it was last year. Those 1.17 million travelers on November 29 is just 41% of the record 2.9 million Americans who traveled by air on the Sunday after Thanksgiving 2019.

This chart tells you almost everything you need to know about the global airline industry — both about the devastating downturn it has been suffering … and about the nascent upturn that is now underway.

From an investment standpoint, this chart shows why the airline sector has been one to avoid, and why it may now be one to embrace.

At least, that’s my call …

Finding Your “Happy Place”

Because of the COVID-19 pandemic, daily global airline passenger miles (APMs) plummeted from 90 billion at the beginning of this year to just 3 billion in April. Not surprisingly, airline stocks plummeted.

But as Thanksgiving travel shows, a recovery is underway.

Even though the COVID crisis is worsening in many regions of the globe, airline travel has been reviving. And I expect airline travel to build on its recent recovery next year, as wayfaring folks embark on the journeys they have been deferring for nearly a year.

You see, airline travel is not simply about going from Point A to Point B to attend a business meeting or fulfill some other sort of obligation. It is about bucket lists, adventures, romances, enlightenment, cultural curiosity, and retirement dreams.

Many folks around the world place a premium on these sorts of life-enriching experiences.

To underscore that point, let’s take a somewhat whimsical look at the world around us, viewed through the lens of the 2019 World Happiness Report, produced in partnership with the Gallup World Poll.

Here in the United States, Disneyland has staked a claim to the title “The Happiest Place on Earth.” But according to the World Happiness Report, that title belongs to Finland.

It’s true. According to the report, which relies partly on Gallup’s “well-being” poll of 156 countries, Finland’s score is tops in the world.

The results of this quirky poll do not mean that we should all pack up our possessions and move to Helsinki. But these results do provide a fascinating glimpse into foreign locales.

The World Happiness Report relies partly on a Gallup survey of 1,000 adults in each of the 156 countries. The pollster asks each participant five questions:

  1. Did you feel well-rested yesterday?
  2. Were treated with respect yesterday?
  3. Did you smile or laugh a lot yesterday?
  4. Do you experience enjoyment yesterday?
  5. Did you learn or do something interesting yesterday?

From the results of this poll, Gallup calculates a Positive Experience Index score for each country. The World Happiness Report integrates these scores with additional quantitative metrics to produce a “Happiness Index.”

Here in the States, we’re used to being “Número Uno” in almost every facet of human existence. We’re the richest and most powerful country on the planet.

But according to Gallup’s survey, wealth and power do not necessarily produce happiness … at least not reliably. And neither does a nation’s relative lack of wealth and power automatically produce a disgruntled or unhappy populace.

To be sure, it’s more agreeable to have some cash in your pockets than to have none. As Woody Allen once quipped, “Money is better than poverty, if only for financial reasons.”

That said, aggregate national wealth is no guarantor of national contentment. The United States ranks only 19th on Gallup’s ranking from the Positive Experience Index.

Meanwhile, many “poor” countries around the globe rank higher than the U.S. and provide a wealth of positive experiences.

Knowing this, the wayfaring American with a taste for something a little different may want to take a closer look at some of the “Happiest Places on Earth”… either as a post-COVID travel destination or a part-time residence.

Alternatively, adventuresome travelers may want to consider some of the destinations on International Living’s list of “The World’s Best Places to Retire.” Every year, my colleagues at International Living conduct a survey to identify attractive retirement destinations.

The survey looks at several factors affecting quality of life in each place, including climate, local lifestyle, cost of living, healthcare, visa and residency requirements, and how easy it is for newcomers to fit in once they arrive.

The table below presents 2019’s Top 10 destinations for would-be retirees who want to get away from it all.

Relocating overseas, even part-time, isn’t for everyone, of course. But for those with the inclination to “diversify their lifestyle,” the Happiness Index and the International Living list both provide a shortlist of candidates to consider.

For most of us, a mere taste of foreign culture and experiences is enough to satisfy our wanderlust. But every kind of would-be traveler has been deferring their travel plans for nearly a year.

That pent-up demand should power a major revival in airline travel, which should power a major revival in airline stocks…

Two Ways to Trade Our Return to the Skies

Obviously, humankind has not yet vanquished COVID-19. On the contrary, the pandemic is worsening here in the U.S. and many other parts of the world.

But now that Pfizer Inc. (NYSE:PFE)Moderna Inc. (NASDAQ:MRNA), and other pharmaceutical companies will begin rolling out vaccines, we investors can begin to imagine and end to the pandemic … and to imagine that wayfaring folks will embark on the journeys they have been deferring for nearly a year.

To place a bet on reviving air travel, investors could simply buy a basket of domestic and international airline stocks.

I expect airlines to perform very well over the coming 12 months, which is why I recently recommended such trade to the readers of Fry’s Investment Report. Find out how to join us and get that pick here.

But in addition to that “shotgun blast” trade, I also just recommended a “rifle shot” trade on a small airline to readers of my elite-level trading service, The Speculator.

I expect this airline to outperform the “shotgun blast” approach over the coming year.

So far, leisure travel throughout the world is rebounding faster than business travel. But many leisure travelers cannot yet travel to any of their coveted overseas destinations.

That’s good news for this small airline.

Prior to Thanksgiving, the company was flying approximately 36% of its North American schedule compared to last year – and it expects that figure to bump up to the mid-60%s during the coming holidays.

Plus, it expects to resume some international flights “shortly.”

Certainly, this stock is speculative. But it is one that could deliver a double to Speculator members. over the next 12 months, even if the overall market is going nowhere.

I also expect the “shotgun blast” that I recommended to Fry’s Investment Report members to perform very well next year, no matter how the broad economy is performing or how well — or poorly — the stock market is doing.

On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends … before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south.


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