Airline stocks were among the worst hit at the onset of the Covid-19 pandemic and the subsequent lock-down. However, with the support of the government coupled with fundraising, airline companies have navigated the worst of the crisis. It seems that airline stocks are positioned for another leg of upside.

Vaccinations against Covid-19 are being administered at a robust pace in the United States. Recent data shows that “roughly 61.3% of American adults have received at least one Covid-19 vaccine dose.” Further, about 49.6% are fully vaccinated. This is already having a sizable positive impact, as Covid-19 cases have declined by more than 50% since the beginning of May 2021.

As the vaccination drive continues at a healthy pace and Covid-19 cases decline, full economic reopening is in the cards. With significant pent-up demand for leisure travel, airline stocks look positioned to benefit.

Let’s talk about four fundamentally strong airline stocks that can deliver health returns in the next few quarters.

• Southwest Airlines (NYSE:LUV)
• JetBlue Airways (NASDAQ:JBLU)
• Alaska Air (NYSE:ALK)
• Spirit Airlines (NYSE:SAVE)

4 Best Airline Stocks: Southwest Airlines (LUV)

From a fundamental perspective, LUV stock is among the top names among airline stocks. For almost three months, the stock has been sideways after a big rally. With wider economic reopening, LUV stock seems positioned for another break-out.

Talking about fundamentals, the stock is the only airline stocks in the U.S. with an investment grade rating. As of May 2021, the airline reported a strong liquidity buffer of $16.7 billion. It’s also worth noting that the company’s unencumbered assets totaled $11 billion. Further, with a leverage of 58%, the company has ample financial flexibility as it navigates challenging times.

Another factor to like about Southwest is a 22% domestic market share. The airline is a market leader in 22 of the top 50 U.S. metro areas. With pent-up demand for travel and tourism within the country, the airline is well positioned to benefit.

For the first quarter of 2021, the airline reported average cash burn of $13 million per day. However, for March 2021, the airline had a cash burn of $9 million per day. Clearly, as cash burn reduces, the stock is well positioned for upside with strong fundamentals.

Southwest also has a robust orderbook of 628 aircraft to be delivered over the next ten years. This provides visibility for steady revenue and cash flow growth once the industry is back to pre-pandemic levels.

Airline Stocks: JetBlue Airways (JBLU)

JBLU stock is another name among airline stocks that has relatively strong fundamentals from a balance sheet perspective. The stock has also been in a consolidation mode and looks attractive as demand picks up.

Amid the weakness in the industry, JetBlue has increased the number of routes domestically. Further, the company is making an entry into the transatlantic market with non-stop service between New York and London.

Additionally, the Northeast alliance with American Airlines (NASDAQ:AAL) will help JetBlue make inroads into broader geographies. Overall, these initiatives will have a positive impact on growth once travel and tourism is near pre-pandemic levels.

From a balance sheet perspective, the company closed Q1 2021 with total liquidity of $3.2 billion. With an adjusted-debt-to-capital ratio of 59%, the company airline has robust financial flexibility.

Another reason to like JetBlue is the focus on investing in next generation fuel efficient aircraft. In the next few years, this is likely to have a positive impact on the EBITDA margin and cash flows.

In April 2021, JetBlue announced that the airline will be investing $20.5 million in Universal Hydrogen. The latter is in the development of a hydrogen logistics network and regional aircraft conversion kits. With global focus on clean energy, the investment can yield positive long-term results.

Airline Stocks: Alaska Air (ALK)

ALK stock is another quality name among airline stocks. The stock is currently trading near its 52-week high. However, it seems that the positive stock momentum will sustain.

There were several positives from Q1 2021 results. First and foremost, the airline reported positive operating cash flow of $167 million. Cash flow upside was driven by robust advance bookings. Further, the airline had a total liquidity buffer of $5.3 billion. With a debt-to-capitalization of 62%, the airline is emerging from the crisis with a healthy balance sheet.

Alaska Air is also focused on continued cost reduction. For the year, the airline expects to reduce structural cost by $250 million. As airline capacity improves, Alaska is positioned for higher EBITDA margin and robust cash flows.

The airline also announced 12 new routes for Q1 2021 with a focus on West Coast destinations. Alaska also announced recall notice for 350 pilots who were on extended leaves. This is an indication of the point that demand is likely to increase meaningfully in the next few quarters.

Spirit Airlines (SAVE)

SAVE stock has trended higher by 57% in the last six months. Considering the demand growth and the expansion plans, SAVE stock is among the top airline stocks to consider.

In terms of the flight expansion, Spirit closed Q1 2021 with a fleet of 159 aircraft. By the end of the year, the company expects to increase the fleet to 173 aircraft. Further, by the end of FY2023, the number of aircraft in the fleet is expected to increase to 221. Clearly, with a robust fleet expansion plan, Spirit is well positioned for revenue and cash flow growth.

It’s also worth noting that for Q1 2021, the company has guided for an adjusted EBITDA margin of negative 5% to break-even. Therefore, as airline capacity increases, Spirit is well positioned to deliver positive EBITDA in Q3 2021.

The airline ended Q1 2021 with a total liquidity buffer of $1.9 billion. Spirit is therefore well positioned from a growth financing perspective. Once operating cash flows accelerate, the airline will have enhanced capital expenditure flexibility.

Overall, SAVE stock looks attractive considering the growth plans and focus on lowering cost. As a matter of fact, the airline already has the lowest unit-cost base in the U.S. airline sector.

On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.