Airline Stocks To Consider Buying For 2023

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Written on:
21 December 2022
Last edit:
25 January 2023

The global aviation industry endured an incredibly difficult period as the Covid-19 pandemic spread around the world. Governments placing travel restrictions meant little to no revenues for commercial airlines, which created a significant cash crunch for these companies while stock prices dropped. However, the strict lockdowns did not last long (relatively speaking) and airlines could assume their daily operations. Despite this, customers were weary of long flights and high ticket prices for some time after the world started to open up again. 

With this challenging period now seemingly a thing of the past, the airline industry is seeking to remedy the damage done by the pandemic and to find strategies to remain profitable and achieve meaningful growth. 

Post-Covid challenges for the airline industry

The Covid-19 pandemic has dealt a huge blow to the global airline industry, whose revenues totaled $328 billion in 2020 alone. The lockdown measures decimated revenues, with a majority of airlines only operating freight carriers, as leisure travel was completely prohibited in most countries. 

This major disruption caused airlines to accrue vast sums of debt to weather the storm, which will have an impact on how they operate in the future. New debt requires additional revenues to pay off the interest, which, coupled with rising inflation rates, is likely to lead to higher ticket prices for flights. However, there is another side to this, which is the consumers. After spending months in lockdown, people are likely to take vacations to reconnect with their surroundings and travel more to depressurize after a stressful period spent stuck at home. 

This is the big bet for the airlines, as business flights remain in lower demand due to the new work-from-home culture that has remained even after the pandemic. 

American Airlines Group Inc (NASDAQ:AAL)

American Airlines is a network carrier that offers air transportation services for passengers and cargo. The company has hubs in major U.S. cities like Chicago, Dallas, New York, Philadelphia, Miami, Charlotte, Washington D.C., and Phoenix. The company’s mainline fleet consists of 865 carriers. 

American Airlines was founded in 1930 and is headquartered in Fort Worth, Texas. 

Stock performance in 2022

american airlines stock.png

American Airlines had a challenging year in 2022. After the pandemic woes had lifted and leisure travel started to pick up again, the stock marked a significant rally. However, ballooning debt, problems with the Boeing 737, and supply costs pressured the stock downward in what has been a resilient bear market across the board. 

Despite all this, American Airlines is optimistic about the rising demand for leisure flights and expects revenues to grow further in 2023. Heated competition and high costs have hindered the company’s ability to turn a profit in 2021, but this has not been the case in 2022, which is important for AAL’s cash supply in the long run. 

Financial results

 Q3 FY 2022Q2 FY 2022Q3 FY 2021Full FY 2021
Revenue$13,462 mln$13,422 mln$8,969 mln$29,882 mln
Cost of revenue$10,638 mln$10,517 mln$7,937 mln$29,855 mln
Operating expense$1,894 mln$1,888 mln$1,427 mln$5,073 mln
Net income$483 mln$476 mln$169 mln($1,993 mln)
Diluted EPS0.690.680.25(3.09)
Assets$66,652 mln$67,963 mln$68,437 mln$66,467 mln
Liabilities$74,545 mln$76,385 mln$75,874 mln$73,807 mln
Equity($7,893 mln)($8,422 mln)($7,437 mln)($7,340 mln)
Cash & cash equivalents$11,232 mln$12,522 mln$14,536 mln$12,431 mln
Free cash flow($1,166 mln)$1,047 mln($1,765 mln)$292 mln

American’s financials have picked up considerably since the end of 2021. While QoQ revenue growth is nothing to write home about, the company can secure its cash reserves once again, thanks to profitable quarters. It must be noted that revenues are still significantly lower than pre-pandemic levels, which has been a common theme across the entire aviation industry post-Covid. The company’s debt burden is an important factor that American Airlines needs to address in the long run, especially after interest rate hikes from the Federal Reserve. 

Notable news

American Airlines has been actively trying to combat the major headwinds in 2022 and has unveiled some important plans throughout the year:

  • American Airlines has signed a new agreement with Amadeus, Sabre, and Travelport to continue distributing its services, which will be in full effect from 2023
  • The Aviation Institute of Maintenance and AAL have partnered up to train a new generation of aviation maintenance professionals
  • Spartan College of Aeronautics and Technology has partnered with the American Airlines Cadet Academy to train pilots and aviation technicians
  • British Airways and American Airlines have co-located at Terminal 8 of the John F. Kennedy International Airport in a $400 million joint investment

Ryanair Holdings plc (NASDAQ:RYAAY)

Ryanair Holdings provides scheduled passenger flights in Europe. The company also provides auxiliary services, such as duty-free, food, merchandise, marketing for accommodation, and car rental services. 

The company has an aircraft fleet of over 500 planes, including 483 Boeing 737s and 29 Airbus A320s. 

Ryanair was founded in 1985 and is based in Swords, Ireland. 

Stock performance in 2022

ryanair stock.png

Ryanair’s stock chart echoes the same issues faced by the aviation industry in 2022. The bear market and rising interest rates have pressured the heavily debt-laden airlines. Ryanair stock has lost nearly 30% of its value since the start of the year. 

Revenue growth and increased demand have helped Ryanair remain positive for 2023. The company also took a different route than most airlines by retaining most of its employees and now enjoys full staffing and is in a prime position to meet growing demand. 

A return to profitability also has analysts optimistic about the stock in the long term. Some analysts even maintain an upside of over 50% for Ryanair stock. 

Financial results

 Q3 FY 2022Q2 FY 2022Q3 FY 2021Full FY 2021
RevenueEUR 4,014.6 mlnEUR 2,601.5 mlnEUR 1,784.4 mlnEUR 4,800.9 mln
Cost of revenueEUR 2,545.1 mlnEUR 2,188.2 mlnEUR 1,434 mlnEUR 4,680.2 mln
Operating expenseEUR 193.7 mlnEUR 173.7 mlnEUR 96.4 mlnEUR 460.3 mln
Net incomeEUR 1,075.9 mlnEUR 187.5 mlnEUR 225 mln(EUR 240.8 mln)
Diluted EPS4.730.821.00(1.06)
AssetsEUR 16,597.3 mlnEUR 16,970.2 mlnEUR 14,069.5 mlnEUR 15,149.8 mln
LiabilitiesEUR 9,931.2 mlnEUR 10,761 mlnEUR 9,136.6 mlnEUR 9,604.5 mln
EquityEUR 6,666.1 mlnEUR 6,209.2 mlnEUR 4,932.9 mlnEUR 5,545.3 mln
Cash & cash equivalentsEUR 4,568.9 mlnEUR 4,621.5 mlnEUR 4,218.2 mlnEUR 3,603.1 mln
Free cash flow(EUR 137.3 mln)EUR 994.4 mlnEUR 215.9 mlnEUR 758.9 mln

Ryanair’s financials show a strong turnaround from the pandemic woes and losses. The company is profitable and maintains a strong cash position, which is vital for long-term financial stability. 

Unlike many of its competitors, Ryanair has a healthy balance sheet and was able to keep liabilities in check during the pandemic years. Q3 net income was also a surprise, with the company bringing in over EUR 1 billion in profits. 

Notable news

Ryanair has been actively working to turn things around in 2022:

  • The company has opened talks to expand into Libya and Egypt
  • Ryanair is poised to be a part of Citi Group’s Sustainable Deposit Solution, as the first European airline to participate in the initiative
  • Ryanair partners with travel technology company Amadeus to enhance offerings
  • CEFA Aviation and Ryanair have signed a 5-year partnership extension for pilot training and flight safety software solutions

Alaska Air Group Inc (NYSE:ALK)

Alaska Air provides cargo and passenger flights through its three business segments; Horizon, Mainline, and Regional. The company’s fleet primarily consists of Boeing 737 airplanes. 

Alaska Air was founded in 1932 and is headquartered in Seattle, Washington, United States. 

Stock performance in 2022

alaska air stock.png

Alaska Air’s stock started the year at a higher valuation but declined as the bear market pressured stocks downward. Despite favorable Q3 financials, the stock is still lower than it was at the start of the year, a drop of over 13% since the start of 2022. 

Analysts view the drop as an opportunity for new investors to buy the stock and expect it to steadily regain lost positions in the long run. 

Alaska Air has managed to bounce back from the financial woes of the pandemic and is seeking to bolster revenues in a market plagued with rising material costs, bearish investor sentiment, and higher interest rates. 

Financial results

 Q3 FY 2022Q2 FY 2022Q3 FY 2021Full FY 2021
Revenue$2,828 mln$2,658 mln$1,953 mln$6,176 mln
Cost of revenue$2,232 mln$2,070 mln$1,529 mln$4,822 mln
Operating expense$289 mln$255 mln$175 mln$680 mln
Net income$40 mln$139 mln$194 mln$478 mln
Diluted EPS0.311.091.533.77
Assets$14,531 mln$14,800 mln$13,882 mln$13,951 mln
Liabilities$10,705 mln$11,001 mln$10,351 mln$10,150 mln
Equity$3,826 mln$3,799 mln$3,531 mln$3,801 mln
Cash & cash equivalents$3,150 mln$3,425 mln$3,195 mln$3,116 mln
Free cash flow($141 mln)$604 mln($194 mln)$738 mln

Alaska Air has a relatively healthy balance sheet with sufficient cash available to fund future growth. However, the thin profit margins, especially in Q3 2022, have caused the company’s EPS to gradually decline quarter after quarter, which may be a cause for concern if the trend is maintained going forward. 

On the other hand, revenue growth has been solid in 2022, and shareholders will be looking forward to Alaska Air withstanding high material costs and improving profitability once supply chain issues have subsided. 

Notable news

Alaska Air has made efforts to weather the headwinds hitting the market in 2022, some notable developments include:

  • Alaska Airlines’ partner, Air Tahiti Nui, to launch new services on the islands of Tahiti
  • Alaska Air to add 52 new Boeing aircraft to its fleet, with deliveries to take place between 2024 and 2027, with the company planning to operate a fleet of 250 Boeing 737-s by 2030
  • Lyft and Alaska Air partner for a miles-per-ride offering to passengers

Deutsche Lufthansa AG (ETR:LHA)

Deutsche Lufthansa is an airline company operating in Germany and internationally. The company’s Eurowings segment provides passenger flights to over 50 countries. 

The Logistics Business segment is responsible for the handling and transportation of cargo, including valuables, perishables, hazardous goods, live animals, etc. 

The MRO segment provides repair and maintenance services to manufacturers and leasing companies. 

The company was founded in 1926 and is based in Cologne, Germany. Deutsche Lufthansa operates a combined fleet of 713 aircraft. 

Stock performance in 2022

lufthansa stock.png

Lufthansa’s stock chart shows a few major swings, which were triggered by positive quarterly reports - sending the stock higher. Overall, Lufthansa has been the rare case of an airline stock that has increased in value over the course of 2022 - gaining over 12% since the start of the year. 

While Lufthansa’s growth may not continue without interruptions in 2023, analysts are nonetheless expecting a positive year overall. The company has also managed to turn the tide toward profitability once more, adding to the optimism. 

Financial results

 Q3 FY 2022Q2 FY 2022Q3 FY 2021Full FY 2021
RevenueEUR 10,068EUR 8,462 mlnEUR 5,207 mlnEUR 16,811 mln
Cost of revenueEUR 8,268 mlnEUR 7,375 mlnEUR 4,668 mlnEUR 16,814 mln
Operating expenseEUR 727 mlnEUR 738 mlnEUR 328 mlnEUR 2,232 mln
Net incomeEUR 809 mlnEUR 259 mln(EUR 72 mln) (EUR 2,191 mln)
Diluted EPS0.680.22(0.15)(2.99)
AssetsEUR 47,559 mlnEUR 46,938 mlnEUR 41,903 mlnEUR 42,538 mln
LiabilitiesEUR 38,378 mlnEUR 39,011 mlnEUR 38,209 mlnEUR 38,048 mln
EquityEUR 9,181 mlnEUR 7,927 mlnEUR 3,694 mlnEUR 4,490 mln
Cash & cash equivalentsEUR 9,723 mlnEUR 9,365 mlnEUR 7,258 mlnEUR 7,597 mln
Free cash flowEUR 442 mlnEUR 2,175 mlnEUR 60 mln(EUR 700 mln)

While Lufthansa’s revenue growth looks impressive, gross revenues are still below pre-pandemic levels. However, the company is turning a profit and has avoided a significant cash crunch or added liabilities through debt financing. The positive free cash flow from Q2 and Q3 of 2022 are positive signs of the company’s ability to work through the high material costs and relatively irregular demand of 2022. Going into 2023, the financials point to Lufthansa’s ability to capitalize on opportunities. 

Notable news

Some highlights from Lufthansa’s newsroom in 2022 include:

  • Opening of a new engine repair facility in Celbridge, with Lufthansa Technik investing EUR 28 million in the facility
  • The option to acquire a 51% stake in ITA Airways in a deal worth EUR 250 million
  • Opening of a new station in Hanoi, Vietnam by Lufthansa Cargo
  • Lufthansa set to hire 20,000 new employees in 2023
  • Unveiling of the new business class suite concept, as well as new sleeper rows in economy class
  • Lufthansa to increase basic pay for approximately 19,000 cabin personnel

Delta Air Lines Inc (NYSE:DAL)

Delta Air Lines provides passenger and cargo transportation in the U.S. and internationally. The company conducts business through two segments, namely Airline and Refinery.

The Airline segment oversees the flight operations, while the Refinery segment focuses on the support, repair, and maintenance of Delta’s fleet of 1,200 aircraft. 

The company has core hubs in the cities of Atlanta, Detroit, Salt Lake City, and Boston. 

Delta Air Lines was founded in 1924 and is headquartered in Atlanta, Georgia. 

Stock performance in 2022

delta stock.png

Similarly to other entries, Delta Air Lines has fallen considerably since the start of 2022 but has managed to rebound since October, as the new holiday season boosts travel demands. 

Much of the fall can be attributed to macroeconomic headwinds, which have affected the entirety of the stock market. However, Delta shareholders are hopeful for a comeback. Despite falling net income and profit margins, Delta’s revenue growth is solid, as the company continues the path toward regaining lost positions due to the Covid-19 pandemic. 

Financial results

xQ3 FY 2022Q2 FY 2022Q3 FY 2021Full FY 2021
Revenue$13,975 mln$13,824 mln$9,154 mln$29,899 mln
Cost of revenue$11,250 mln$11,289 mln$8,073 mln$30,078 mln
Operating expense$1,269 mln$1,016 mln($1,157 mln)($2,046 mln)
Net income$695 mln$735 mln$1,212 mln$280 mln
Diluted EPS1.081.151.890.44
Assets$72,596 mln$74,804 mln$72,783 mln$72,459 mln
Liabilities$68,006 mln$70,994 mln$70,177 mln$68,572 mln
Equity$4,590 mln$3,811 mln$2,606 mln$3,887 mln
Cash & cash equivalents$8,368 mln$10,770 mln$13,202 mln$11,319 mln
Free cash flow($573 mln)$1,577 mln$679 mln$17 mln

Delta has seen steadily growing revenues while returning to profitability. However, the company’s cash reserves have had a reduction. Delta may retain some of its earnings to create a cash cushion to soften the blows dealt by the bear market while accessing funds for additional growth in the long run. 

Notable news

Highlights from Delta’s 2022 newsroom include the following:

  • Delta has partnered up with Joby Aviation to deliver flying taxis to the market by 2025
  • Delta’s LATAM to offer non-stop service from São Paulo to LAX
  • Increased service from Atlanta to Chile and Argentina, including daily flights
  • Delta named as the No.1 in business travel for 12th time in a row, according to a survey conducted by Business Travel News
  • Delta ranked as No.1 among U.S airlines by Conde Nast Traveler readers
  • The Air+Rail program to connect passengers to 20 more destinations across Europe, such as Manchester, Zurich, Rome, and Brussels, with additional plans in Geneva

Key takeaways from airlines stocks in 2023

The airline market has shown resilience and willingness to overcome the problems caused by the Covid-19 pandemic. Coupled with the russia-Ukraine war and increased material costs the bottom lines of almost all commercial airline companies have been greatly impacted. 

However, as consumers resume traveling, the airlines have regained profitability, and are working on reducing their debt burden and increasing operational efficiency for 2023. 

FAQs on airline stocks to buy in 2023

Will airline stocks go up in 2023?

Airline stocks have managed to rebound from the pandemic woes of 2020 which saw record losses and revenue declines for airlines. Stocks are looking to regain lost revenue and return to pre-pandemic levels, which implies more future growth opportunities. 

What are the best airline stocks to buy right now?

Some of the largest airlines, such as Lufthansa, Delta, and American Airlines, are poised to take advantage of growth opportunities in 2023, as they have sufficient cash reserves to withstand the Covid-19 pandemic and probably weather the fears of a looming recession.

Should you buy airline stocks in 2023?

With the global economy facing inflation in 2022, potential turnarounds in 2023 could boost consumer spending and stimulate the airline industry. Currently, investors can buy airline stocks at a discount compared to pre-pandemic levels.