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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?

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 airline stocks are often volatile and can lose altitude in economic downturns.

Today, the global airline industry continues to struggle through the turbulence of the COVID-19 pandemic.

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. Airlines are part of the Industrial sector and the Transportation subsector. 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.

Investing in the Industrial sector

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 Insurance Number (SIN) 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.

How to buy stocks in a company

Airline stocks

If you’re interested in hopping aboard airline stocks, here are some examples to consider before taking flight.

  • Air Canada (TSX: AC)
  • Southwest Airlines Co. (NYSE: LUV)
  • Delta Air Lines, Inc. (NYSE: DAL)
  • Transat A.T. Inc. (Air Transat)(OTC Markets Pink Sheets: TRZBF)
  • Air France-KLM SA (OTC Markets Pink Sheets: AFLYY)
  • China Southern Airlines Company Limited (NYSE: ZNH)
  • International Consolidated Airlines Group, S.A. (LSE: IAG.L)
  • Singapore Airlines Limited (SGX: C6L.SI)

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 USD $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 3 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 USD $476 billion in fiscal year 2021 from USD $340 billion in the current year.

Compare trading platforms

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

Name Product Available Asset Types Stock Fee Option Fee Account Fee ETF Transaction Cost Feature Table description
FREE TRADES
Wealthsimple Trade
Stocks, ETFs
$0
N/A
$0
Free
Get 2 free stocks when you open a Wealthsimple Trade personal account and deposit and trade at least $150.
Pay no commissions when you trade Canadian stocks and ETFs with Wealthsimple Trade.
Interactive Brokers
Stocks, Bonds, Options, ETFs, Currencies, Futures
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0
Min. $1.00, Max. 0.5% of trade value
Extensive trading capabilities and global investment tracking.
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
CIBC Investor's Edge
Stocks, Bonds, Options, Mutual Funds, ETFs
$4.95 - $6.95
$4.95 - $6.95 (+$1.25 per contract)
$0 if conditions met, otherwise $100/year
$6.95
$4.95 - $6.95 is applicable for online stock, ETF and option trades only. Pay $4.95 when you qualify as an Active Trader (trade 150+ times per quarter).
An intuitive and easy-to-use platform with access to a variety of tools that help you make smart decisions and trade with confidence.
OFFER
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95-$9.95
$9.95 + $1 per contract
$0
Free
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
OFFER
Qtrade Direct Investing
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$6.95 - $8.75 + $1.25 per contract
$0 if conditions met, otherwise $25/quarter
$0 - $8.75
Get up to 50 free trades. Be one of the first 100 new Qtrade clients to use the promo code 50FREETRADES and deposit a minimum of $10,000 (or top up to $15,000 to get $150 transfer fees waived). Valid until December 31, 2021.
Qtrade Direct Investing offers low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options. Trade 100 ETFs free of charge and thousands more for $8.75 or lower.
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Compare up to 4 providers

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.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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