These 3 Airlines Are Going to Take Off in the Next 5 Years

June is here and most schools are now on summer vacation. The success of the vaccine rollout and an economy in full swing is great news for hard-hit industries like airlines making hay during the summer travel season.

We asked some of our employees which airline stocks they think have the best chance of success over the next five years. they chose JetBlue Airways (NASDAQ: JBLU), Southwest Airlines (NYSE: LUV), and Allegiant trips (NASDAQ: ALGT).

Image source: Getty Images.

Let’s go into the wild blue over there

Scott Levine (JetBlue): Like so many airlines, JetBlue has experienced tremendous headwinds due to COVID-19. Realizing the inevitable turmoil the pandemic would bring, investors sent the stock into a nosedive; In 2020, stocks plunged more than 68% from mid-February to late March. However, with passengers soaring again, the stock has since rebounded and is up more than 173% since late March 2020. And there is reason to believe that the increase will continue to rise.

For one, management is taking significant steps to ensure the company returns to profitability. For 2021, management is forecasting capital expenditures of around $ 1 billion, mainly used for the acceptance of new aircraft. For example, in the first quarter, JetBlue has three airbus A321neos and expects the delivery of six more aircraft in the second quarter: two A220, two A321neos and two A321LR. By modernizing its fleet – especially with the A220s and A321neos – the company expects an improvement in fuel efficiency and thus a higher margin.

Reaching new shores is another opportunity the company is seizing for future growth. Last month, JetBlue announced it would start flights to London with round-trip fares below $ 600. Flights between New York’s John F. Kennedy International Airport will begin this August, while flights from Boston are scheduled to begin in the summer of 2022.

JetBlue goes beyond its core competency and has other initiatives geared towards increasing revenue, such as the highly customized travel planning website Paisly. Launched in the first quarter of 2021, Paisly uses a customer’s flight information to provide specific recommendations for other travel needs such as hotel stays and rental cars. While it’s still in its early stages of deployment, if Paisly is a success, it can provide customers with a more consistent experience that increasingly associates them with JetBlue.

While it will certainly take JetBlue some time to recover from the effects of the pandemic, management sounded encouraging on the company’s recent conference call in the first quarter of 2021. According to Robin Hayes, the company’s CEO, the company “achieved positive cash flow from operations in March and this milestone is our first step towards achieving positive EBITDA and returning to profitability.” Later in the conversation, JetBlue CFO Steve Priest predicted that the company would “break even in the third quarter and stay in positive territory through year-end” on EBITDA.

The safest bet

Daniel Foelber (Southwest Airlines): According to the latest CDC data, around 41% of the US population is fully vaccinated as COVID-19 cases continue to decline. The launch of the vaccine is great news for airlines, which have seen an impressive surge in traffic. TSA data suggests travel volume was only a third lower in May 2021 compared to May 2019, a huge improvement from the 90% decline in May 2020.

Southwest was one of the few airlines to make a profit in the first quarter. The summer forecast is just as encouraging. In its Investor Update (posted Tuesday), Southwest said it expects balanced core cash flow in June as a sign business is returning to its old form. Southwest is doing all it can to reduce its cash use, which averaged $ 16 million a day in June 2020.

Investors should keep an eye on Southwest’s ability to capitalize on the anticipated summer travel boom. Related to that, Southwest delivered record sales and diluted earnings per share of $ 5.9 billion and $ 1.37, respectively, in the second quarter of 2019 – which shows how well business did before the pandemic.

Southwest’s fame has long been the strength of its record. The ratio of debt to equity and financial debt to equity is understandably higher today than it was a year ago. But to his credit, Southwest has the best record of any major US carrier.

LUV Financial Debt to Equity (quarterly) data from YCharts

Given its cost reductions, optimistic forecasts and leading financial position, Southwest is the safest airline right now. The only downside is that the share price of around $ 58.50 is only 13% below its all-time high of $ 66.99. In other words, much of Southwest’s anticipated turnaround could already be pouring into its stock price.

Allegiant offers investors something different

Lee Samaha (Allegiant Travel): Investing in airlines is about analyzing the numbers and also investing in the issues and trends that ultimately make up the numbers. This consideration comes to mind when looking at the current state of the aviation industry and the issues surrounding it.

Is business travelers (a lucrative source of income for many airlines) coming back sharply or has the pandemic changed the need for business travel? What will be the timing of the recovery in international travel? Show travelers any resistance to flying on one Boeing 737 MAX aircraft?

If you are overly concerned about these issues aside from aerospace suppliers or aircraft leasing companies, investing in Allegiant Travel stock might be the place for you.

In short, Allegiant is a US recreational airline that operates an Airbus-only fleet serving consumers in small to medium-sized cities. As such, it is playing with the willingness and desire of US consumers to enjoy recreational travel following the travel restrictions imposed by lockdowns.

CEO Maury Gallagher certainly believes Allegiant is gearing up for a strong summer. Speaking on the last conference call in early May, he said, “We believe our income levels will match or exceed our final full year of ’19 for the remainder of 2021 and ’22 and beyond.” He also praised the company’s average operating margin of 15% over the past 20 years as evidence of Allegiant’s strong position in a relatively niche market.

Allegiant trades only 13.5 times its 2022 earnings estimates and is a great way to invest in the aviation sector.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

source https://dailyhealthynews.ca/these-3-airlines-are-going-to-take-off-in-the-next-5-years/