In this article, we will take a look at the 10 airline stocks billionaires are piling into. To skip our analysis of the recent market trends and activity, you can go directly to see the 5 Airline Stocks Billionaires Are Piling Into.
The airline industry in the United States operates as an oligopoly with four major airlines — American Airlines Group Inc. (NASDAQ:AAL), Delta Air Lines, Inc. (NYSE:DAL), Southwest Airlines Co. (NYSE:LUV), United Airlines Holdings, Inc. (NYSE:UAL) — accounting for an aggregate market share of nearly 70%, and the remaining market share divided among a series of smaller airlines. The smaller airlines are seeking different avenues to increase market share and improve margins.
Two major transactions have been announced in the recent past pertaining to consolidation in the domestic airline industry in the United States. In July 2022, JetBlue Airways Corporation (NASDAQ:JBLU) announced a definitive agreement to acquire Spirit Airlines, Inc. (NYSE:SAVE) for a cash consideration of $33.50 per share, for an aggregate equity value of $3.8 billion. The transaction is facing significant scrutiny from the U.S. Department of Justice and has undergone a trial in front of a federal court. The verdict is expected in the upcoming days.
Another major M&A transaction in airline industry was announced on December 3, which comprises the all-cash acquisition of Hawaiian Holdings, Inc. (NASDAQ:HA), Hawaii’s biggest and longest-serving airline, by Alaska Air Group, Inc. (NYSE:ALK) for an implied enterprise value of $1.9 billion.
The global airline industry faced one of its worst periods during the COVID-19 pandemic with travel restrictions leading to significant demand destruction. Treading through choppy waters, the industry has finally recovered from the demand destruction caused by the pandemic and is estimated to have recovered to around 107% of the pre-COVID level, according to latest IATA figures. The global industry posted cumulative losses of nearly $180 billion over the 2020-2022 period and is on track to post a net profit of $23.3 billion in 2023 with revenues of $896 billion.
The International Air Transport Association (IATA) expects travel demand to further increase in 2024 with revenues projected to grow at 7.6% year-on-year to a record $964 billion, 15% more than the pre-covid peak level in 2019. Several factors are expected to contribute to this growth, including significant increase in the number of flights expected to be available in 2024, at 40.1 million, compared to 36.8 million this year, as well as high demand for travel.
Willie Walsh, IATA’s Director General, made the following comments about the financial outlook for the industry:
“Considering the major losses of recent years, the $25.7 billion net profit expected in 2024 is a tribute to aviation’s resilience. People love to travel and that has helped airlines to come roaring back to pre-pandemic levels of connectivity. The speed of the recovery has been extraordinary; yet it also appears that the pandemic has cost aviation about four years of growth. From 2024 the outlook indicates that we can expect more normal growth patterns for both passenger and cargo.”
Airline Stocks Billionaires Are Piling Into
Photo by emiel molenaar on Unsplash
Methodology
To compile our list of the 10 airline stocks billionaires are piling into, we first made a list of airline stocks that trade on major U.S. stock exchanges. Then, the number of billionaires that had bought their shares as of September 2023 was determined through Insider Monkey’s database. Out of these, the stocks with the most billionaire investors were selected. The stocks on our list have been ranked in an ascending order of billionaire ownership.
10. Air Transport Services Group, Inc. (NASDAQ:ATSG)
Number of Billionaire Holders: 7
Wilmington, Ohio-based Air Transport Services Group, Inc. (NASDAQ:ATSG) is a leading provider of aircraft leasing and cargo and passenger air transportation and related services to domestic and foreign air carriers and other companies that outsource their cargo and passenger airlift requirements.
On November 6, Air Transport Services Group, Inc. (NASDAQ:ATSG) released its financial results for the three months ended September 30, 2023. It generated total revenues of $523 million and a net income of $17 million. It generated a normalized EPS of $0.32 for the quarter which missed the consensus estimate by $0.17.
As of Q3 2023, Air Transport Services Group, Inc. (NASDAQ:ATSG) shares were owned by 7 billionaires with the total shares held by them valued at $39 million. On the other hand, 19 hedge funds were also among its shareholders with ownership of shares worth $106 million.
Like other stocks such as American Airlines Group Inc. (NASDAQ:AAL), Southwest Airlines Co. (NYSE:LUV), and Delta Air Lines, Inc. (NYSE:DAL), the shares of Air Transport Services Group, Inc. (NASDAQ:ATSG) are among the airline stocks billionaires are piling into.
Panama City, Panama-based Copa Holdings, S.A. (NYSE:CPA) is a Latin American provider of airline passenger and cargo service through its two principal operating subsidiaries, Copa Airlines and Wingo. Copa Airlines operates from the Republic of Panama, and Wingo operates a low-cost business model within Colombia and various cities in the region.
On November 15, Copa Holdings, S.A. (NYSE:CPA) released its financial results for Q3 2023. Its revenue increased by 7% y-o-y to $868 million while net income increased by 61% y-o-y to $187 million. Its normalized EPS of $4.39 surpassed consensus estimates by $0.57. The board of directors of the company also approved a new $200 million share repurchase program.
Following the earnings release, Raymond James analyst Savanthi Syth raised the price target for Copa Holdings, S.A. (NYSE:CPA) shares to $155 from $152 and maintained a ‘Strong Buy’ rating. The price target represents a potential upside of nearly 58% based on the share price on December 7.
Copa Holdings, S.A. (NYSE:CPA) will make a dividend payment of $0.82 per share for Q4 2023 which translates to an annualized dividend yield of 3.34%, based on the share price on December 7.
Chicago, Illinois-based United Airlines Holdings, Inc. (NYSE:UAL) is a leading airline that transports people and cargo throughout North America and destinations in Asia, Europe, Africa, the Pacific, the Middle East, and Latin America. It provides freight and mail services to commercial businesses, freight forwarder and logistic firms as well as the United States Postal Service.
On November 15, United Airlines Holdings, Inc. (NYSE:UAL) and the Houston Airport System announced an investment in United's hub at George Bush Intercontinental Airport (IAH) with United's Terminal B Transformation Program. The program encompasses the construction of 40 new gates for both domestic and international travel, with $1.9 billion expected to be invested by the airline and $624 expected to be funded by the City of Houston.
On October 18, United Airlines Holdings, Inc. (NYSE:UAL) released its financial results for Q3 2023 which surpassed consensus estimates with operating revenues of $14.5 billion, up 12.5% y-o-y, and a net income of $1.1 billion, 21% more than Q3 2022.
Following the earnings release, JP Morgan analyst Jamie Baker raised the price target for United Airlines Holdings, Inc. (NYSE:UAL) shares to $98 from $93 and maintained an ‘Overweight’ rating. The price target represents a potential upside of 138.04% based on the share price on December 7.
Saint George, Utah-based SkyWest, Inc. (NASDAQ:SKYW) is the holding company for SkyWest Airlines and SkyWest Leasing, an aircraft leasing company. SkyWest Airlines connects passengers to 250 destinations across North America with an operating fleet of nearly 500 Bombardier and Embraer aircraft.
On October 26, SkyWest, Inc. (NASDAQ:SKYW) released its financial results for Q3 2023. Its revenues declined by 3% y-o-y to $766 million, while its net income shrunk 51% y-o-y to $23 million. The normalized EPS was recorded at $0.55 for the quarter, which exceeded consensus estimates by $0.13.
SkyWest, Inc. (NASDAQ:SKYW) has been on an aggressive share repurchase program and repurchased $244 million during the first nine months of 2023, which accounted for nearly 19% of the company’s outstanding shares as of year-end 2022. The company has an outstanding availability of $136 million under its current repurchase program.
Like other stocks such as American Airlines Group Inc. (NASDAQ:AAL), Southwest Airlines Co. (NYSE:LUV), and Delta Air Lines, Inc. (NYSE:DAL), the shares of SkyWest, Inc. (NASDAQ:SKYW) are among the airline stocks billionaires are piling into.
New York-based JetBlue Airways Corporation (NASDAQ:JBLU) is a leading low-cost airline carrying customers to more than 100 destinations throughout the United States, Latin America, Caribbean, Canada, and Europe.
In July 2022, JetBlue Airways Corporation (NASDAQ:JBLU) announced a definitive agreement to acquire Spirit Airlines, Inc. (NYSE:SAVE) for a cash consideration of $33.50 per share, for an aggregate equity value of $3.8 billion. Since then, the company has been jumping through hoops to satisfy the regulatory authorities. It has agreed to divest all of the target company holdings at New York’s LaGuardia Airport to Frontier Group Holdings, Inc. (NASDAQ:ULCC), and Boston Logan International Airport and Newark Liberty International Airport holdings to Allegiant (NASDAQ:ALGT).
The merger between JetBlue Airways Corporation (NASDAQ:JBLU) and Spirit Airlines, Inc. (NYSE:SAVE) has been challenged by the Department of Justice and the trial, in front of a U.S. federal judge, wrapped up on December 5. There is a possibility that the merger may go through with some additional asset divestitures by the companies.
As of Q3 2023, JetBlue Airways Corporation (NASDAQ:JBLU) shares were held by 20 out of 910 hedge funds tracked by Insider Monkey with a total value of $52 million. Its largest shareholder was Ken Griffin’s Citadel Investment Group with ownership of 3.0 million shares valued at $14 million.
