The Only 2 Airline Stocks Outperforming the S&P 500 in 2021

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The resurgence of COVID-19 cases has been taking a heavy toll on the airline industry. Commercial flights arriving at U.S. destinations daily earlier this month showed a significant decline from the same period in 2019.

According to The Boeing Company’s (BA) vice president of commercial marketing, Darren Hulst, the industry will recover to 2019 levels of traffic by the end of 2023, early 2024. The plane maker expects international routes to take the longest time to recover, however.

Despite the industry’s weak growth prospects, investors’ optimism about a recovery in demand for leisure travel on solid progress on the vaccination front has helped American Airlines Group Inc. (AAL) and Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (VLRS) perform well so far this year. In fact, these are the only airline stocks that have outperformed the broader S&P 500 index year-to-date. AAL and VLRS have gained 25.1% and 73% in price, respectively, versus the S&P 500’s 18% returns year-to-date. So, it we think could be worth adding these two stocks to one’s watchlist.

American Airlines Group Inc. (AAL)

AAL in Fort Worth, Tex., is a network air carrier that provides scheduled air transportation services for passengers and cargo. The company offers an average of nearly 6,700 flights per day to nearly 350 destinations in more than 50 countries.

On September 15, AAL announced the extension of its partnership with Gol Linhas Aereas Inteligentes S.A. (GOL), Brazil’s largest airline, to offer a seamless experience for all customers. The company expects its commercial cooperation with GOL to accelerate its growth in the near term.

On July 29, AAL and JetSMART signed a letter of intent to create the broadest network and most rewarding customer offering in the Americas. This is aligned with the company’s strategy to strengthen its global presence.

AAL’s total operating revenues increased 361% year-over-year to $7.48 billion in its fiscal second quarter, ended June 30. Its operating income stood at $441 million, up 117.7% from the same period last year. Its net income grew 100.9% from its year-ago value to $19 million. The company’s EPS increased 100.6% year-over-year to $0.03.

Analysts expect AAL’s revenues to increase 233.2% year-over-year to $9.19 billion in the current quarter, ending September 30, 2021. The consensus EPS estimate for the ongoing quarter indicates an 87.9% rise from the same period last year. AAL has a notable earnings surprise history as well; it beat the consensus EPS estimates in three  of the trailing four quarters. Shares of AAL have gained 44.8% in price over the past year and 4.1% over the past month.

Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (VLRS)

VLRS, through its subsidiaries, provides air transportation services for passengers, cargo, and mail internationally. It is headquartered in Mexico City, Mexico.

On August 25, VLRS received approval from the Civil Aviation Authority of El Salvador for its subsidiary, Vuela El Salvador, S.A. de C.V., for regular and nonregular international public air transportation services for passengers, cargo, and mail. This should help  the company to garner substantial returns in the coming months.

For its fiscal second quarter, ended June 30, VLRS’s total operating revenues increased 653.7% year-over-year to Ps.11.50 billion ($581 million). Its EBIT grew 215.6% from its year-ago value to Ps.2.65 billion ($134 million), while its net income improved 201% year-over-year to Ps.1.54 billion ($78 million) over the period. The company’s earnings per ADS increased 187.6% year-over-year to Ps.13.19 ($0.67).

A $593.30 million consensus revenue estimate for its fiscal fourth quarter, ending December 2021 indicates a 46.5% improvement from the same period last year. Analysts expect the company’s EPS to come in at $0.44 in the next quarter, indicating a 1,000% rise year-over-year. Furthermore, VLRS surpassed the Street’s EPS estimates in three of the trailing four quarters.

VLRS has gained 34.3% in price over the past six months. The stock has gained 175.5% over the past year to close its last trading session at

AAL shares were trading at $20.04 per share on Monday morning, up $0.31 (+1.57%). Year-to-date, AAL has gained 27.08%, versus a 16.91% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More…

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