As global demands surge, the airline industry Is showing strong potential driven by renewed consumer confidence and robust economic activity. This trend positions airline companies to capitalize on the growing leisure, business, and international travel appetite.
Considering the positive outlook of the industry, it might be considered wise for investors to invest in three fundamentally strong airline stocks, American Airlines Group Inc. (AAL), SkyWest, Inc. (SKYW), and United Airlines Holdings, Inc. (UAL) for long-term growth.
The most important key factors for such a rebound in airline talks are improved route networks and expanded flight capacities. With a focus on optimizing schedules and increasing load factors, airlines are better positioned to meet the soaring demand.
Further, airline companies are doubling down on dynamic pricing and tailored travel experiences to boost ancillary revenue and enhance customer satisfaction. Also, the global passenger numbers are projected to reach 9.7 billion in 2025, which surpasses the pre-pandemic levels.
The International Air Transport Association (IATA) expects airline employment to grow to 3.3 million in 2025. Besides, the airline market is set to be worth $598.81 billion in 2025, growing at a CAGR of 8%. This shift is due to globalization, open sky agreements, economic fluctuation, strategic alliances in mergers, and shifting consumer preferences.
Given these encouraging trends, now let’s look at the fundamentals of the three above-mentioned Airlines, beginning with the third stock.
Stock #3: American Airlines Group Inc. (AAL)
AAL operates as a network air carrier. The company provides scheduled air transportation services for passengers and cargo. It operates a mainline fleet of 965 aircraft.
In terms of forward non-GAAP P/E, AAL is trading at 6.87x, 66.1% lower than the industry average of 20.24x. Likewise, the stock’s forward EV/Sales and Price/Sales multiples of 0.71 and 0.19 are 64.5% and 88.4% lower than their respective industry averages of 2.00 and 1.62.
AAL for the fourth quarter (ended December 31, 2024) reported total operating revenues of $13.66 billion, indicating a 4.6% growth from the prior-year quarter. The company’s operating income, excluding net special items (non-GAAP), stood at $1.15 billion, reflecting an increase of 73.4% from the prior-year quarter’s value.
Also, its net income excluding net special items came in at $609 million, and its EPS excluding net special items amounted to $0.86 per share, up 217.2% and 196.6% year-over-year, respectively.
The consensus revenue estimate of $15.28 billion for the fiscal second quarter (ending June 2025) represents a 6.6% increase year-over-year. The consensus EPS estimate of $1.41 for the same quarter indicates a 29% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS in three of the trailing four quarters.
AAL’s stock has surged 66.4% over the past six months and 15.9% over the past three months to close the last trading session at $16.41.
AAL’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
AAL has a B grade for Growth and Value. It is ranked #7 out of the 25 stocks in the B-rated Airlines industry. Click here to see the additional ratings for AAL (Momentum, Stability, Sentiment, and Quality).
Stock #2: SkyWest, Inc. (SKYW)
SKYW operates a regional airline in the United States. The company operates through two segment, SkyWest Airlines and SWC; and SkyWest Leasing. It also leases regional jet aircraft and spare engines to third parties; and provision of on-demand charter, airport customer, and ground handling services.
In terms of forward non-GAAP PEG, SKYW is trading at 0.09x, 94.9% lower than the industry average of 1.87x. Likewise, the stock’s forward EV/EBITDA and Price/Book multiples of 6.60 and 1.51 are 44.9% and 53.5% lower than the industry averages of 12.00x and 3.24x, respectively.
For the fourth quarter of 2024, which ended on December 31, SKYW's total operating revenues increased 25.6% year-over-year to $944.40 million, while the operating income stood at $144.08 million, up 421.6% year-over-year. Its net income amounted to $97.38 billion, representing an increase of 455.9% from the last year’s period. Also, the company’s earnings per share for the quarter increased 457.1% year-over-year to $2.34.
Street expects SKYW’s revenue for the fiscal first quarter (ending March 2025) to increase 2.9% year-over-year to $948.75 million. Its EPS for the same period is expected to register a 42.1% growth from the prior year, settling at $2.06. In addition, it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of SKYW have gained 85.7% over the past year and 51% over the past six months to close the last trading session at $110.16.
It’s no surprise that SKYW has an overall rating of B, which equates to a Buy in our POWR Ratings system. It has a B grade for Growth, Sentiment, and Quality. Out of 25 stocks in the same B-rated industry, SKYW is ranked #4.
Beyond what is stated above, we’ve also rated SKYW for Value, Momentum, and Stability. Get all SKYW ratings here.
Stock #1: United Airlines Holdings, Inc. (UAL)
UAL provides air transportation services internationally. The company transports people and cargo through its mainline and regional fleets. It also offers catering, ground handling, flight academy, and maintenance services for third parties.
In terms of forward non-GAAP P/E, UAL is trading at 7.75x, which is 61.7% lower than the industry average of 20.24x. The stock’s forward Price/Sales ratio of 0.56x is 65.8% below the industry average of 1.62x. Also, its forward Price/Cash Flow multiple of 3.75 compares to the industry average of 15.85x.
In the fiscal fourth quarter that ended on December 31, 2024, UAL’s consolidated revenue increased 7.8% year-over-year to $14.69 billion. The company reported operating income of $1.50 billion, indicating a 50.6% growth from the prior-year quarter. Its adjusted net income came in at $1.09 billion, up 64.2% year-over-year, while its adjusted EPS grew 63% from the prior-year quarter to $3.26. Moreover, UAL’s adjusted EBITDA rose 33.3% from the year-ago value to $2.34 billion.
Analysts expect UAL’s revenue for the fourth quarter (ended January 2025) to increase 8.3% year-over-year to $13.58 billion, while its EPS for the same period is expected to remain flat from the prior year to $1.05. Moreover, it topped Street revenue and EPS estimates in each of the trailing four quarters, which is excellent.
The stock has gained 149.2% over the past six months and 95.9% over the past nine months to close the last trading session at $103.31.
UAL’s positive prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Growth and a B for Value. Within the same Airlines industry, it is ranked third. Click here to see UAL’s ratings for Momentum, Stability, Sentiment, and Quality.
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UAL shares were trading at $104.01 per share on Wednesday afternoon, up $0.70 (+0.68%). Year-to-date, UAL has gained 7.12%, versus a 2.98% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
