The airline industry has historically been a turbulent one to invest in. And it makes sense. High capital costs and rarely making significant money tends to make investors jump ship at the slightest hint of bad news and jump along for the ride on any good news from airline stocks.
So while you can’t remove the turbulence from the industry, you can lessen it by investing in the best positioned airline stocks. This post is going to walk you through the 3 airline stocks that are most likely to make you some money and not be so turbulent that you need to call a flight attendant.
3 Airline Stocks To Buy
#1. JetBlue (NASDAQ: JBLU)
When you think of airline stocks, you probably think of the big players first. But don’t overlook little JetBlue. The company has been quietly gaining momentum and is in the process of cleaning up past mistakes.
What past mistakes you might ask? The biggest issue JetBlue faces is one it created. It simply was too aggressive in its growth plans. As a result, revenue per available seat mile fell by 5%. The pain carries over to the first quarter of 2017 where revenue per available seat mile is expected to decline another 5%.
But JetBlue is correcting its mistake. They are slowing expansion in 2017. They also announced a cost cutting initiative to achieve an annual structural cost savings by 2020 of $250-$300 million.
Finally, the airline is adding more premium seat flights. The Mint routes, which are cross country routes that offer flat, bedlike premium seating, will expand to more cities in 2017. Many travelers rave about these seats, so while demand is there, JetBlue should be able to add to the bottom line by offering more premium seats and more routes in 2017.
In all, JetBlue is well positioned for the short term and the long term. As they slowly continue to expand operations, you can bet JetBlue will become a household name like the other major airlines.
#2. Ryan Air (NASDAQ: RYAAY)
Unless you have been to Europe, you probably are not aware of Ryan Air. They are the discount airline of Europe and they are a great company to invest in.
Starting with the financials, the company’s debt to equity ratio is much lower than the industry standard, sitting at 105% and revenue has climbed each of the past 5 years. They are also slowing expanding East into more European markets where they have not had a footprint in previous years. This slow methodical growth will help the bottom line while not negatively impacting revenue per available seat mile.
The only negative to Ryan Air is Brexit. The stock took a slight hit when the Brexit vote was announced, but the stock price has come back as investors know this is a good stock to own long term.
Increasing revenues will be a challenge as there remains pressure on the Pound, but once the currency rebounds, the sky is the limit for Ryan Air.
#3. Alaska Air (NYSE: ALK)
Alaska Airlines made headlines when it announced it was buying Virgin Air. Many investors were skeptical about the purchase, but long term, it makes sense. First, it helps Alaska Air diversify from their main hub in Seattle. And second, with the airline able to squeeze as much profit as it can, currently over 20%, it will do the same for the Virgin brand as well. As it stands now, Virgin’s profitability is just over 11%.
Higher profitability means a higher stock price and more hubs allows the airline to avoid having to drastically cut airline ticket prices to compete with other airlines.
In addition to the merged synergies, by the end of 2017, the airline will have replaced its remaining outdated 737’s with new larger, and more fuel efficient models. The carrier will end up with nearly 25% more seating capacity. This will only increase revenues more as Alaska Air has been able to increase capacity in recent years.
The stock price for Alaska Air has been on a steady rise but with its recent stall, now is a great time to get in on this company before the stock price shoots higher.
As mentioned at the beginning of this post, airline stocks are volatile by nature. But as with anything you invest in, you can weed away some risk by investing smartly. By investing in strong, healthy airlines, you can take some of this volatility out of the picture.
Of course, there is still the chance of the unexpected happening, but these stocks will be able to rebound from any unforeseen issues they may face.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.