The following is a transcription of the above video.
Perhaps no industry sees as much stock price polarization as the aviation sector. With this in mind, we thought it would be a good idea to provide an overview of airline stocks to better inform your investing.
Bookended by seasonal surges in the summer and through the holidays, airline revenues tend to sour in the intervening months. Strategies to offset these declines, such as lowering fares and reducing carbon emissions, are confronted by rising fuel costs and limited consumer spending.
Global variables for airline investing
As geopolitical tensions escalate in the Middle East, causing a diminished oil supply, oil prices are rising at an alarming rate; consequently, shares of airline companies across the U.S. are slipping. For example, as of Jan. 3, Delta Air Lines (NYSE:DAL) fell 2.5 per cent, JetBlue Airways (NASDAQ:JBLU) was down 4.5 per cent, and United Airlines (NASDAQ:UAL) and American Airlines (NASDAQ:AAL) are down 1.1 and 2.9 per cent, respectively.
On the Canadian front, Air Canada (TSE:AC) ended 2023 on a bearish note, finishing with a 3.6 per cent decline, marking the fourth consecutive year of losses for the airline. Following a massive selloff in share prices during the early phase of the pandemic, Air Canada lost nearly 56 per cent of its value in 2020, and 2021.
In the years that followed, despite improving its financial position, the airliner continued to burn cash due to rising costs of labour and fuel.
Trendier competition and alternative investments
Outperformance in trendier areas, such as AI, positions the aviation sector as more of an afterthought for investors. There’s probably even some investment PTSD that’s still lingering from the onset of the pandemic.
But for those wanting to keep the transportation sector part of their investment portfolio, experts suggest investing in transportation ETFs, which primarily invest in companies involved in travel services and the industries that support them.
While these companies often include airlines, they also include railroads, trucking and vehicle manufacturers. Through ETFs, investors get access to companies with a similar profile. ETFs are especially convenient because they provide instant diversification at a low cost.
This added benefit is appealing to all types of investors, especially because choosing stocks requires adequate investment knowledge.
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