With a lower-interest-rate environment prevailing in the market, the airline industry is gaining significant attention as people travel more, and higher-margin corporate travel continues to increase. This momentum is likely to reflect positively on the performance of airline stocks.
Below, I have highlighted three fundamentally sound airline stocks: Delta Air Lines, Inc. (DAL), Qantas Airways Limited (QABSY), and Air Canada (ACDVF), which look well-positioned for potential long-term gains.
With the economic recovery and holiday season nearing, the airline sector has seen a steady climb in ticket bookings and traveler numbers across the U.S. and internationally.
As per the International Air Transport Association (IATA) data, the international demand measured in revenue passenger kilometers (RPK) increased 9.2% from September 2023. The total demand rose 7.1% year-on-year, making it an all-time high for September.
Furthermore, the shift toward sustainable aviation and fuel-efficient practices, which airlines are adopting to reduce costs and environmental impact, is one promising factor for the airline industry.
Over the past two years, U.S. airports have seen a major passenger traffic increase, with the Los Angeles International Airport leading the chart with a 26.7% increase in passenger traffic. In addition, the global total passenger estimate is projected to reach approximately 9.5 billion in 2024, reflecting 10% year-on-year growth from 2023.
Moreover, many airlines are strategically expanding their routes, especially to international destinations that are witnessing high demand. Besides, the global flight market is anticipated to reach $770 billion by 2029, exhibiting a CAGR of 4.4%.
Given these encouraging trends, let’s look at the fundamentals of the three top Airlines, beginning with the third stock.
Stock #3: Delta Air Lines, Inc. (DAL)
DAL provides scheduled air transportation for passengers and cargo worldwide. The company operates through two segments: Airline and Refinery.
On July 9, DAL and Riyadh Air, Saudi Arabia's innovative new full-service global carrier, signed a Strategic Cooperation Memorandum of Understanding to expand connectivity and premium travel options between North America, the Kingdom of Saudi Arabia, and beyond. This agreement should strengthen connectivity and expand networks for both airlines.
DAL for the third quarter (ended September 30, 2024) reported total operating revenue of $15.68 billion, indicating a marginal growth from the prior year quarter. Its net income came in at $1.27 billion and $1.97 per share, up 14.8% and 14.5% year-over-year, respectively. Also, the company’s free cash flow stood at $95 million compared to the prior-year quarter’s loss of $250 million.
The consensus revenue estimate of $14.67 billion for the fiscal fourth quarter (ending December 2024) represents a 3.1% increase year-over-year. The consensus EPS estimate of $1.72 for the same quarter indicates a 34.5% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue in each of the trailing four quarters.
DAL’s stock has surged 88.1% over the past year and 63% over the past three months to close the last trading session at $64.05.
DAL’s stance is apparent in its POWR Ratings. Among the 26 stocks in the Airlines industry, it is ranked #18. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Click here to see the additional DAL ratings (Growth, Value, Momentum, Stability, Sentiment, and Quality).
Stock #2: Qantas Airways Limited (QABSY)
Headquartered in Mascot, Australia, QABSY offers air transportation services in Australia and internationally. The company operates in four segments: Qantas Domestic; Qantas International; Jetstar Group; and Qantas Loyalty.
On October 25, QABSY announced its new upgrades for the A330 Aircraft that operates international flights to Hong Kong, Singapore, and Tokyo. This refurbishment has an installation of new Economy seats designed with more comfort, a 4K OLED 13.3” entertainment touchscreens, and USB-C fast charging and Bluetooth for the Economy section.
In the same month, QABSY announced an investment of more than $40 million in new skills and training initiatives. This investment is in cabin safety training assets and new facilities across Australia. The company is also set to launch a new Qantas Group Safety Academy in 2025, offering safety education credentials designed to upskill and develop safety professionals.
In the fiscal year 2024, which ended on June 30, 2024, QABSY’s revenue and other income increased 10.7% year-over-year to $21.94 billion. The company reported a total comprehensive income for the year of $1.27 billion, indicating 6.5% growth from the prior-year period, while its EPS stood at $75.1.
Analysts expect QABSY’s revenue and EPS for the current year (ending June 2025) to be $15.37 billion and $3.55, respectively. For the fiscal year 2026, its revenue and EPS are expected to grow by 3.6% and 18.9% from the prior year to $15.92 billion and $4.23, respectively.
Over the past year, the stock has gained 62%, closing the last trading session at $27.61.
QABSY’s bright 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 a B grade for Stability and Quality. It is ranked #3 out of 26 stocks within the same industry. Click here to see QABSY’s ratings for Growth, Value, Momentum, and Sentiment.
Stock #1: Air Canada (ACDVF)
Based in Saint-Laurent, Canada, ACDVF provides domestic, U.S. transborder, and international airline services. The company offers scheduled passenger services under the Air Canada Vacations and Air Canada Rouge brand names.
On November 7, ACDVF announced the extension of its intermodal strategy across Europe to include Italy, Spain, Britain, and Asia, with its first operator in South Korea, where customers can easily book onward land connections to destinations when they purchase flight tickets. This expanded offer makes it easy and flexible for customers to add connections to a single itinerary.
In the same week, the company announced that it is set to add new seasonal services and increase capacity in the summer of 2025. This launch will provide new non-stop flights offering more than 100,000 weekly seats to 30 destinations across Europe and North Africa.
During the third quarter ended September 30, 2024, ACDVF reported operating revenue of CAD6.11 billion ($4.38 billion). Its net income of CAD2.03 billion ($1.46 billion) indicates growth of 62.8% from the prior year’s quarter, and its EPS came in at CAD5.38, up 74.7% year-over-year. In addition, the free cash flow grew 108.9% year-over-year to CAD282 million ($202.20 million).
Street expects ACDVF’s revenue and EPS for the current year (ending December 2024) to be $15.64 billion and $1.61, respectively. For the fiscal year 2025, its revenue and EPS are expected to grow by 6.5% and 21.8% from the prior year to $16.66 billion and $1.96, respectively.
The stock has surged 47.6% over the past three months and 34.8% over the past month to close the last trading session at $16.81.
ACDVF’s POWR Ratings reflect this robust outlook. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Quality. The stock is ranked #1 in the Airlines industry. Click here to access the additional ACDVF ratings (Growth, Momentum, Stability, and Sentiment).
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DAL shares . Year-to-date, DAL has gained 60.92%, versus a 26.77% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
