Insights

3 Top Airline Stocks to Buy for the Long Haul

The airline industry took a hard hit at the start of the pandemic in 2020. More than two years later with lockdowns eased and travel restrictions relaxed, the sector is seeing signs of recovery. Airline stocks got boosted this month when Delta Air Lines (NYSE: DAL) reported first-quarter earnings on April 13 and provided an optimistic outlook for the second quarter. Delta expects demand to rise more this year. 
In March, many of the top U.S. airlines’ CEOs were lobbying President Joe Biden to end the transportation mask mandate and testing requirements for international travelers. Last week, a federal judge lifted the mandate that required all passengers to wear masks (the requirement was likely to be lifted by the Centers for Disease Control and Prevention in early May anyway), but testing requirements will continue.

Image source: Getty Images.

The changes cheered up many airlines as they hope demand will rise further. Looking at their efforts to recover, besides Delta, American Airlines Group (NASDAQ: AAL) and Southwest Airlines (NYSE: LUV) also look like excellent buy-and-hold stocks for the long haul. Let’s take a closer look at these three top airline stocks to buy for the long haul.
1. Delta Air Lines
For the first quarter, Delta reported operating revenue of $8.2 billion, which was 79% more than it reported in the same period in 2019. Its total domestic passenger revenue recovered 83% while international passenger revenue recovered 54% versus the same quarter in 2019. Though it reported operating losses in January and February, demand rose in March as domestic and international corporate travel started returning. The rise in demand helped the airline with a revenue recovery of 79% with an operating profit margin of 10%. March was a profitable month for Delta.
Delta also generated free cash flow of $197 million to pay off some of its debt. At the end of the quarter, it had an adjusted net debt of $21 billion, with $12.8 billion in liquidity. 
Delta management hopes the second quarter will be even better as travel demand keeps surging now. Management sees revenue recovery accelerating from 93% to 97% from 2019 levels. Total passenger capacity could also show up at around 84% with operating profit margin in the range of 12% to 14%. Delta is also preparing well to handle the rising demand.
2. American Airlines
American Airlines’ first quarter also saw some good numbers. Its first-quarter revenue of $8.9 billion showed a recovery rate of 84% from the same quarter of 2019. However, it also reported a net loss of $1.6 billion, or $2.52 per share.
But the airline is hopeful for the second quarter as well. Looking at the demand trends, American Airlines expects to be profitable in the second quarter. Note that the estimates are based on current fuel price assumptions. It also hopes passenger capacity will jump around 92% to 94% from Q2 2019’s levels. Total revenue could be 6% to 8% higher than in Q2 2019, management said in the Q1 press release.
Despite turbulent times, the airline also paid $4.1 billion in debt and plans to pay off $15 billion of debt by the end of 2025. 
3. Southwest Airlines
After Delta and American Airlines’ good recovery in the first quarter, Wall Street analysts expect Southwest Airlines to report a good first quarter as well. The airline is set to release its first-quarter earnings results on April 28. Analysts see total revenue of around $4.67 billion for Q1 2022, an approximate 119% increase from Q1 2021. But the airline could report an earnings loss of $0.30 per share in Q1, according to projections.
Southwest already reported profits in its previous quarter, which was its first profitable quarter since the pandemic hit. Net profits came in at $68 million, or $0.11 per share, in its fourth quarter. Its full-year net income also was impressive at $977 million, or $1.61 per share, compared to a net loss of $3.5 billion, or $6.22 per share in 2020.
Chances are it could end up with a profitable quarter again considering Delta reported demand rose quite high in March. In January, Southwest discussed its guidance for Q1 2022. It hopes to see revenue down by 10% to 15% from 2019 levels with a load factor (passenger seating capacity) of about 75% to 80%. It also aims to have paid $60 million in debts by the first quarter’s end. 
Are airlines getting back to normal?
Airline stocks could soar once demand matches or even crosses pre-pandemic levels. As travel restrictions ease more, people are keener than ever to travel now. A Deloitte report discussed how the global intent to book an international flight climbed to 23% by June 2021.
All three of these stocks are trading way below their 52-week highs, making it the right time to buy and hold them for the long haul to earn some fruitful returns.
Sushree Mohanty has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy. –

The airline industry took a hard hit at the start of the pandemic in 2020. More than two years later with lockdowns eased and travel restrictions relaxed, the sector is seeing signs of recovery. Airline stocks got boosted this month when Delta Air Lines (NYSE: DAL) reported first-quarter earnings on April 13 and provided an optimistic outlook for the second quarter. Delta expects demand to rise more this year. 

In March, many of the top U.S. airlines’ CEOs were lobbying President Joe Biden to end the transportation mask mandate and testing requirements for international travelers. Last week, a federal judge lifted the mandate that required all passengers to wear masks (the requirement was likely to be lifted by the Centers for Disease Control and Prevention in early May anyway), but testing requirements will continue.

Image source: Getty Images.

The changes cheered up many airlines as they hope demand will rise further. Looking at their efforts to recover, besides Delta, American Airlines Group (NASDAQ: AAL) and Southwest Airlines (NYSE: LUV) also look like excellent buy-and-hold stocks for the long haul. Let’s take a closer look at these three top airline stocks to buy for the long haul.

1. Delta Air Lines

For the first quarter, Delta reported operating revenue of $8.2 billion, which was 79% more than it reported in the same period in 2019. Its total domestic passenger revenue recovered 83% while international passenger revenue recovered 54% versus the same quarter in 2019. Though it reported operating losses in January and February, demand rose in March as domestic and international corporate travel started returning. The rise in demand helped the airline with a revenue recovery of 79% with an operating profit margin of 10%. March was a profitable month for Delta.

Delta also generated free cash flow of $197 million to pay off some of its debt. At the end of the quarter, it had an adjusted net debt of $21 billion, with $12.8 billion in liquidity. 

Delta management hopes the second quarter will be even better as travel demand keeps surging now. Management sees revenue recovery accelerating from 93% to 97% from 2019 levels. Total passenger capacity could also show up at around 84% with operating profit margin in the range of 12% to 14%. Delta is also preparing well to handle the rising demand.

2. American Airlines

American Airlines’ first quarter also saw some good numbers. Its first-quarter revenue of $8.9 billion showed a recovery rate of 84% from the same quarter of 2019. However, it also reported a net loss of $1.6 billion, or $2.52 per share.

But the airline is hopeful for the second quarter as well. Looking at the demand trends, American Airlines expects to be profitable in the second quarter. Note that the estimates are based on current fuel price assumptions. It also hopes passenger capacity will jump around 92% to 94% from Q2 2019’s levels. Total revenue could be 6% to 8% higher than in Q2 2019, management said in the Q1 press release.

Despite turbulent times, the airline also paid $4.1 billion in debt and plans to pay off $15 billion of debt by the end of 2025. 

3. Southwest Airlines

After Delta and American Airlines’ good recovery in the first quarter, Wall Street analysts expect Southwest Airlines to report a good first quarter as well. The airline is set to release its first-quarter earnings results on April 28. Analysts see total revenue of around $4.67 billion for Q1 2022, an approximate 119% increase from Q1 2021. But the airline could report an earnings loss of $0.30 per share in Q1, according to projections.

Southwest already reported profits in its previous quarter, which was its first profitable quarter since the pandemic hit. Net profits came in at $68 million, or $0.11 per share, in its fourth quarter. Its full-year net income also was impressive at $977 million, or $1.61 per share, compared to a net loss of $3.5 billion, or $6.22 per share in 2020.

Chances are it could end up with a profitable quarter again considering Delta reported demand rose quite high in March. In January, Southwest discussed its guidance for Q1 2022. It hopes to see revenue down by 10% to 15% from 2019 levels with a load factor (passenger seating capacity) of about 75% to 80%. It also aims to have paid $60 million in debts by the first quarter’s end. 

Are airlines getting back to normal?

Airline stocks could soar once demand matches or even crosses pre-pandemic levels. As travel restrictions ease more, people are keener than ever to travel now. A Deloitte report discussed how the global intent to book an international flight climbed to 23% by June 2021.

All three of these stocks are trading way below their 52-week highs, making it the right time to buy and hold them for the long haul to earn some fruitful returns.

Sushree Mohanty has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.

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