The global pandemic has been harder on the airline sector than most industries. Border closures and travel restrictions left airplanes stranded on tarmacs around the world in 2020 and throughout much of 2021. And even as restrictions have been eased, travel demand has been slow to recover.
The International Air Transport Association (IATA) trade group estimates that the Covid-19 pandemic cost the global aviation industry more than $200 billion in losses between 2020 and 2022.
The good news is that a recovery appears to now be underway. IATA also reports that annual passenger traffic recovered to 42% of pre-pandemic 2019 levels last year and continues to improve this year as restrictions related to the Omicron variant of Covid-19 are eased. In other “good news” comes a report that the TSA Instagram account is considered “the Funniest Travel Account” on the social media platform.
While it’s still early in the year, we thought it a good time to look at three of the best airline stocks to buy flying into April 2022. These stocks are also among the top four holdings in the U.S. Global Jets ETF (NYSEARCA:JETS). They make up almost 30% of the assets of the exchange-traded fund’s 52-stock portfolio.
Airline Stocks to Buy: American Airlines (AAL)
Investors should focus on best of breed stocks, and American Airlines comes with a top pedigree. The Fort Worth, Texas-based company operates the biggest airline not just in the U.S. but the entire world, flying to 350 destinations in 50 countries, and employing more than 130,000 people globally.
To be sure, it’s been a difficult two years for American Airlines. The company burned through more than $6 billion of cash in 2020 during the trough of the pandemic, and has accumulated nearly $25 billion in long-term debt over the past 24 months. These metrics weigh on AAL stock, which is down 5.3% year-to-date at $17.01 a share and remains 44% below its pre-pandemic share price of about $30.
The good news for investors is that American Airlines is recovering from the ravages of Covid-19 and its share price remains comparatively cheap. Many analysts expect AAL stock to takeoff later this year given the expected recovery in both domestic U.S. air travel and to international destinations, where American Airlines has more exposure than any other U.S.-based carrier.
Wolfe Research recently initiated coverage of the entire U.S. airline industry with an “overweight” rating, and singled out American Airlines as a carrier that should lead the pack during the recovery in air travel.
Delta Air Lines (DAL)
Delta Air Lines was the first carrier to report a profit coming out of the pandemic. The Atlanta, Georgia-based company reported a full year 2021 profit of $280 million, its first in two years.
And, despite the fact that the emergence of the omicron variant of Covid-19 will push the carrier to a first quarter loss, Delta is still guiding for a full year profit in 2022. And the company continues on a hiring spree with plans to bring onboard 3,000 to 5,000 new employees this year on top of 9,000 hires last year. These hires include pilots, flight attendants and baggage handlers, among others.
Delta Air Lines’ outperformance and bullish guidance hasn’t been able to lift its share price. Year-to-date, DAL stock has declined 3% to now trades at $37.91 a share. That’s on pace with the decline in the S&P 500 index amid ongoing market volatility.
But despite its recent slump, Delta stock can likely soar higher in coming months. The share price remains about 37% lower than the $62 a share it was trading at pre-pandemic. The company has said that while leisure air travel came roaring back in the second half of 2021, business travel has yet to recover, providing the company with further room to grow and expand in coming months.
Airline Stocks to Buy: Southwest Airlines (LUV)
Southwest, the largest discount carrier in the U.S., is one of the few airlines whose stock has managed to buck the market downturn this year. So far in 2022, LUV stock eked out a 2.52% gain to $44.38 a share.
However, the stock remains down 16% over the past six months and is 26% lower then where it was a year ago. The JETS ETF share price shows a 14.8% decline over the past six months and is 22.4% lower then where it was a year ago.
Southwest Airlines has had a difficult time getting back on track coming out of the pandemic. In the lead up to the busy Thanksgiving through New Year’s holiday period, the Dallas, Texas-based airline was forced to cancel hundreds of flights due to pilot shortages and scheduling problems.
The carrier’s finances also continued to experience turbulence in 2021, with the airline reporting that it lost $1.3 billon for the year. However, Southwest Airlines looks to now be putting the turmoil of the past year behind it.
For the most recent fourth quarter, Southwest reported that it earned $5.05 billion of revenue and a quarterly profit of $0.14 per share, which was double the profit of $0.07 a share that analysts had forecast.
With the company getting its staffing and scheduling sorted, it is expected that Southwest will put the impact of the pandemic behind it for good and fly sunnier skies throughout this year.
On the date of publication, Joel Baglole held a long position in LUV stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.