The global airline industry has been one of the sectors most affected by the coronavirus pandemic, with flights to and from some countries grounded completely. Various airlines have halted their flights, and the latest developments with coronavirus mean that it’s still risky to travel. Many countries have closed their borders to UK travellers due to the new variant of the virus.
Unsurprisingly, share prices in airlines have been tumbling since the beginning of the year. Analysts are split on when the markets will ultimately hit bottom, but some investors are seeing these falls as an opportunity to snap up stock. Find out more about investing in airlines.
Perhaps the most obvious way to invest in this sector is to buy shares in individual airlines (or their parent companies). When buying stocks, investors traditionally look at the current financial results of a company, whether they are paying any dividends to shareholders, and what the firm’s future stock market performance might be.
But with airlines, other factors to consider include passenger numbers, the proportion of flights they are operating where all the seats have been sold, and the cost of fuel – one of the big expenses for airlines.
In these unpredictable times, the balance sheet for most carriers is not necessarily going to be looking too healthy. And with passenger numbers at historic lows, metrics around traveller numbers could be hard to gauge.
So while share prices may look attractively cheap, one of the most important considerations will be whether the airline you are considering investing in is in a strong enough position to weather the current coronavirus storm. Would-be investors would not want to purchase bargain shares in an airline that could potentially fold later this year as a result of the pandemic.
ETFs – or exchange traded funds – are another investment option worth considering. In simple terms, ETFs are funds which own and “track” a variety of assets, including stocks in various companies. Buying into an ETF means you do not have to purchase individual shares in different companies yourself. More general information on this type of fund can be found in Finder’s guide to ETFs.
Currently, the US Global Jets ETF (known as JETS) is the only ETF that exclusively tracks airlines stocks. But other larger funds, and ones which focus on the transport sector for example, will also include airline stocks.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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