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Investing in airline stocks

Airline stocks saw a decade of gains shot down by COVID-19. When might they rise again?

Javier Simon
Javier Simon

Updated

Fact checked
Key stocks and ETFs to watch Pick a platform and trade

Airline stocks can be lucrative investments during thriving economies when more people take vacations and businesses expand. These can also deliver strong returns when oil costs plummet.

But these often volatile stocks can lose altitude in economic downturns. Today, the global airline industry continues to struggle through the turbulence of the COVID-19 pandemic.

What's in this guide?

What are airline stocks?

Airline stocks are the stocks of companies that provide air transportation for passengers and cargo using a variety of aircraft including airplanes and helicopters. On the passenger side, a few large corporations dominate the global market. But you can also find smaller, domestic companies that provide discount flights and operate under lower costs.

How to invest in the airline sector

There are several ways your airline stock investing can take flight. You can purchase shares of individual airline stocks or buy shares in an ETF which invests in a basket of stocks.

Here’s how to start:

  1. Choose a stock trading platform. You have plenty to choose from, so be sure to compare your options to find the one that works best for you.
  2. Open your account. Be ready with your ID, Social Security number and bank account information.
  3. Fund your account. You’ll need to transfer money to your brokerage account before you can start investing. Some platforms let you start with as little as $1.
  4. Search for stocks. Look up stocks by ticker symbol or use a stock screener to filter the types you’re interested in.
  5. Place an order. Once you’ve found an investment you want, specify how much of it you wish to purchase and submit your order.
  6. Monitor your investments. Track the performance of your portfolio by logging on to your account.

Airline stocks

If you’re interested in hopping aboard airline stocks, here are some examples to consider before taking flight. Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.

What ETFs track the airline category?

If you’re interested in diversifying your portfolio with airline stocks, consider an exchange-traded fund (ETF). These are baskets of stocks that come from various companies, sectors and geographies. Many offer exposure to airline stocks, but only one is primarily made up of airline stocks and other companies associated with aviation including aircraft manufacturers, airline operators and airports.

Why invest in airline stocks?

During times of economic prosperity, airline stocks can offer strong returns. People have more disposable income to travel and take vacations. Business operations can also extend to new areas and even new countries. All this can involve airline travel.

In fact, the decade prior to 2020 saw airline stocks flying high. Before the outbreak of COVID-19, the projected growth of revenue ton-miles (RTM) for international flights led by US commercial air carriers was about 4% per year from 2020 to 2040.

But lockdowns and travel restrictions following the COVID-19 outbreak all but grounded the rise of airline industry profits and passenger capacity.

Risks of investing in airline stocks

Investing in airline stocks today can be risky business, especially for day traders, as the industry continues weathering the storm of COVID-19. The International Air Transport Association (IATA) expects the airline industry to lose more than $250 billion by 2020’s end. And it doesn’t expect airlines to see pre-pandemic passenger levels until 2023. The association notes that even in 2025, passenger traffic will stand 10% below what it had envisioned for that year before the pandemic.

At the height of the coronavirus crisis in April, passenger volume had dropped by 96%, a low not seen since the 1950s. For the week beginning November 30, 2020, the global industry’s number of scheduled flights was down by 45.8% compared to the week of December 2, 2019.

For active investors, the state of the airline industry may look gloomy. But long-term investors may be able to buy these stocks at discount prices and see profits when the industry recovers.

The airline industry has flown out of harm’s way before, but it took time. According to A4A, it took America’s airlines three years to recover from 9/11 and more than seven years to recover from the global financial crisis of 2008.

But as news of a coronavirus vaccine develops, passengers may feel safer to return to the skies. The IATA noted the airline industry has made it through the hardest part of the pandemic and is on its way to recovery. with air transport revenue expected to reach $476 billion in fiscal year 2021 from $340 billion in the current year.

Compare trading platforms

To invest, you’ll need a brokerage account. Explore your options below.

Name Product Stock trade fee Asset types Option trade fee Annual fee
Sofi Invest
Sofi Invest
$0
Stocks, ETFs, Cryptocurrency
N/A
0%
A free way to invest in stocks, ETFs and crypto.
Go to site
More Info
Robinhood
Robinhood
$0
Stocks, Options, ETFs, Cryptocurrency
$0
0%
Make unlimited commission-free trades in stocks, funds, and options with Robinhood Financial.
Go to site
More Info
Moomoo
Moomoo
$0 for US stocks
Stocks, Options, ETFs
$0
Trade stocks on the US, Hong Kong, Shanghai and Shenzhen markets.
Go to site
More Info
TD Ameritrade
TD Ameritrade
$0
or $25 broker-assisted
Stocks
$0 + $0.65/contract,
or $25 broker-assisted
TD Ameritrade features $0 commission for online stock, but watch out for high short-term ETF and broker-assisted trading fees.
Go to site
More Info
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Compare up to 4 providers

Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.

Bottom line

Airline stocks can soar during strong economies and when oil prices drop. Prior to 2020, the global airline industry was seeing success. But the COVID-19 pandemic, which has rocked the global economy, delivered a particularly damaging blow to the airline sector.

Still, the industry may have weathered the harshest storms as it makes its way toward recovery. This can take years, however. So carefully analyze airline stocks and make sure they can align with your investment goals and risk tolerance. And don’t forget to compare brokerage platforms.

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