In this article, we will take a look at the 10 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.”
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.
9. Copa Holdings, S.A. (NYSE:CPA)
Number of Billionaire Holders: 7
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.
8. United Airlines Holdings, Inc. (NYSE:UAL)
Number of Billionaire Holders: 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.
7. SkyWest, Inc. (NASDAQ:SKYW)
Number of Billionaire Holders: 8
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.
6. JetBlue Airways Corporation (NASDAQ:JBLU)
Number of Billionaire Holders: 8
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.
5. Hawaiian Holdings, Inc. (NASDAQ:HA)
Number of Billionaire Holders: 8
Honolulu, Hawaii-based Hawaiian Holdings, Inc. (NASDAQ:HA) is Hawaii’s biggest and longest-serving airline offering nearly 150 daily flights within the Hawaiian Islands, and nonstop flights between Hawaii and 15 U.S. gateway cities, as well as flights connecting Honolulu and American Samoa , Australia , Cook Islands , Japan , New Zealand , South Korea, and Tahiti.
On December 3, Alaska Air Group, Inc. (NYSE:ALK) and Hawaiian Holdings, Inc. (NASDAQ:HA) announced an agreement under which Alaska Air Group, Inc. (NYSE:ALK) will acquire all outstanding shares of Hawaiian Holdings, Inc. (NASDAQ:HA) for a cash consideration of $18.00 per share which implies a transaction value of nearly $1.9 billion, including debt.
The transaction price implies a potential upside of 29.96% based on Hawaiian Holdings, Inc. (NASDAQ:HA) share price as of December 7. The companies expect the transaction to “unlock more destinations for consumers and expand choice of critical air service options and access throughout the Pacific region, Continental United States and globally.”
Following the announcement, Deutsche Bank analyst Michael Linenberg upgraded the rating for Hawaiian Holdings, Inc. (NASDAQ:HA) shares to ‘Buy’ from ‘Hold’ and raised the price target to $16 from $4.
4. Alaska Air Group, Inc. (NYSE:ALK)
Number of Billionaire Holders: 8
Seattle, Washington-based Alaska Air Group, Inc. (NYSE:ALK) is an airline holding company that operates two airlines, Alaska, and Horizon, and McGee Air Services, an aviation services provider. Alaska operates a fleet of narrowbody passenger jets on primarily longer stage-length routes. It contracts with Horizon and SkyWest for shorter-haul capacity and receives all passenger revenue from those flights.
On December 3, Alaska Air Group, Inc. (NYSE:ALK) and Hawaiian Holdings, Inc. (NASDAQ:HA) announced an agreement under which Alaska Air Group, Inc. (NYSE:ALK) will acquire all outstanding shares of Hawaiian Holdings, Inc. (NASDAQ:HA) for a cash consideration of $18.00 per share which implies a transaction equity value of nearly $1.0 billion.
Alaska Air Group, Inc. (NYSE:ALK) expects to finance the acquisition through cash on hand and new debt with the transaction expected to close in 12-18 months, subject to regulatory clearance and approval from target company shareholders. The company expects $235 million of run-rate synergies and expects “high single digits accretion to earnings within first two years.”
According to the Insider Monkey data on 910 leading hedge funds, 28 hedge funds were long Alaska Air Group, Inc. (NYSE:ALK) and held shares valued at $171 million, as of Q3 2023. Ric Dillon’s Diamond Hill Capital was the largest hedge fund shareholder with ownership of 1.16 million shares valued at $43 million.
3. Delta Air Lines, Inc. (NYSE:DAL)
Number of Billionaire Holders: 9
Delta Air Lines, Inc. (NYSE:DAL) is a leading global airline serving more than 200 million passengers on an annual basis across its global network of more than 280 destinations across six continents. The company employs more than 100,000 people and operates over 4,000 daily flights.
On October 12, Delta Air Lines, Inc. (NYSE:DAL) released its financial results for Q3 2023. Its revenue increased by 11% y-o-y to $15.5 billion, while net income surged by 59% y-o-y to $1.1 billion. It generated a normalized EPS of $2.03 for the quarter, which exceeded the consensus estimates by $0.08.
In its Q3 2023 investor letter, Patient Capital Management, a value investing firm, made the following comments about Delta Air Lines, Inc. (NYSE:DAL):
“Historically, airlines have passed on higher fuel prices to customers with a lag. We see Delta as a premium global consumer brand that is materially misunderstood by the market. The market still sees airlines as a cyclical, bankruptcy prone industry. An improved supply-demand picture, management discipline and a better business mix make Delta a more resilient business. Their loyalty program with American Express is a source of stable and growing revenues with $6.5B in remunerations this year with a goal of reaching $10B by the end of the contract in 2028. Premium and ancillary service revenue should generate 65-70% of the total in the next year or two. The company should continue to generate consistent midteens returns on capital. As the market begins to understand, we believe the company will continue to be rewarded. On top of this, free cash flow is expected to expand generating a cumulative ~$11B from ’23-’25, or one-half of its current market cap. As the company pays down debt while growing the dividend and eventually resuming share repurchases, we think the stock will continue to trend higher.”
2. Southwest Airlines Co. (NYSE:LUV)
Number of Billionaire Holders: 11
Southwest Airlines Co. (NYSE:LUV) operates Southwest Airlines, a major passenger airline that provides scheduled air transportation in the United States and near-international markets. It had a fleet of 817 aircraft operating across 121 airports across 11 countries.
On October 26, Southwest Airlines Co. (NYSE:LUV) released its financial results for Q3 2023. Its revenue increased by 5% y-o-y to $6.5 billion, while net income shrunk 30% y-o-y to $193 million. The normalized EPS of $0.38 missed consensus estimates by $0.01.
On November 16, the Board of Directors of Southwest Airlines Co. (NYSE:LUV) declared a quarterly dividend payment of $0.18 per share. Its shares currently have a dividend yield of 2.46% based on the share price on December 7.
As of Q3 2023, 33 of the 910 hedge funds tracked by Insider Monkey were long Southwest Airlines Co. (NYSE:LUV) and held shares worth $334 million. Richard Oldfield’s Oldfield Partners was the largest shareholder with ownership of 2.7 million shares valued at $74 million.
1. American Airlines Group Inc. (NASDAQ:AAL)
Number of Billionaire Holders: 13
Fort Worth, Texas-based American Airlines Group Inc. (NASDAQ:AAL) is a holding company operating a major network air carrier, providing scheduled air transportation for passengers and cargo through its hubs. As of December 31, 2022, it operated 925 mainline aircraft supported by its regional airline subsidiaries and third-party regional carriers, which together operated an additional 536 regional aircraft.
On October 19, American Airlines Group Inc. (NASDAQ:AAL) released its financial results for Q3 2023. It generated operating revenues of $13.5 billion and a net loss of $545 million. Its normalized EPS of $0.38 surpassed consensus estimates by $0.13.
American Airlines Group Inc. (NASDAQ:AAL) has been on a mission to strengthen its balance sheet. As part of this plan, the company has reduced its debt level by nearly $10.9 billion from the peak levels in mid-2021. This includes debt reduction of $1.4 billion in Q3 2023.
As of Q3 2023, American Airlines Group Inc. (NASDAQ:AAL) was the most sought-after stock among billionaires on our list of 10 airline stocks billionaires are piling into, as 13 of the billionaires tracked by Insider Monkey held its shares, valued at $609 million. Jim Simons’ Renaissance Technologies was its largest shareholder with ownership of 22.4 million shares valued at $287 million.
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Disclosure: None. 10 Airline Stocks Billionaires Are Piling Into is originally published on Insider Monkey.
