Ranking the 7 Top Airline Stocks to Buy From Best to Worst

One of the hardest-hit sectors following the onset of the  pandemic centered on air transportation, which brings an awkward segue for top airline stocks to buy. After all, at one point between Feb. and April 2020, air passenger revenue miles cratered nearly 97%. During the worst of the crisis, many analysts feared the worst for the sector.

Fortunately, fears of the pandemic faded. In addition, government agencies the world over reduced or outright eliminated mobility restrictions. That sparked intense interest in travel, particularly as collective cabin fever built up over roughly a two-year period. Therefore, the top airline stocks to buy makes sense at the current juncture. Nevertheless, if we’re being objective, most companies in the airliner industry simply don’t pass muster. Even for those that do, not every name offers the same magnitude of stability.

Below are the top airline stocks to buy, from the best to the worst.

American Airlines (AAL)

One of the major U.S. carriers, American Airlines (NASDAQ:AAL) currently commands a market capitalization of $9.09 billion. On a year-to-date basis, AAL dropped nearly 27% of equity value, reflecting broader anxieties in the market. However, over the trailing month, AAL gained almost 8%, instilling some confidence among contrarian speculators.

Fundamentally, American may benefit from its partnership with Japan Airlines (OTCMKTS:JAPSY). Recently, the island nation opened to foreign tourists without special restrictions, thus catapulting tremendous travel interest. Combined with weakness in the Japanese yen relative to the dollar, American tourists theoretically can enjoy a shopping bonanza.

According to Gurufocus.com, AAL is modestly undervalued. For one thing, American features a forward price-earnings ratio of 7.6 times. In contrast, the industry median is slightly over 11 times. To be fair, the other metrics in the company’s financials, such as a balance sheet that could use shoring up, don’t present an encouraging picture. But again, the reopening of key international travel destinations may bolster AAL as one of the top airline stocks to buy.

Copa Holdings (CPA)

Headquartered in Panama City, Panama, Copa Holdings (NYSE:CPA) is the parent company of Panamanian carrier Copa Airlines. Additionally, the company also owns Colombian carrier Copa Airlines Colombia. Currently, Copa Holdings commands a market cap of $2.94 billion. Since the start of the year, CPA declined by slightly less than 10%. Given the steep losses in the major indices, that’s impressive damage control.

While not the most popular brand among U.S.-based investors, investors need to pay careful attention to CPA stock. Per Gurufocus.com, the company features a modestly undervalued business. While its long-term revenue trends could use some fixing, Copa comes alive in terms of profitability. For example, its net margin stands at nearly 12%. This ranks better than approximately 70% of its peers.

Furthermore, Copa carries a return on equity of 21.4%. In contrast, the industry median is 7.9%. Thus, the company features a quality business despite the shocks the underlying sector absorbed. Therefore, it’s worth consideration for top airline stocks to buy.

Air Transport Services (ATSG)

An American aviation holding company, Air Transport Services (NASDAQ:ATSG) provides air cargo transportation and related services to domestic and foreign air carriers. As well, the company provides such services to enterprises that outsource their air cargo lift requirements. While not the most direct play among top airline stocks to buy, ATSG deserves significant consideration.

At the moment, Air Transport features a market cap of $2.01 billion. Since the beginning of this year, ATSG dipped “only” 9%, reflecting tremendous resilience (relative to new normal headwinds). Moving forward, Air Transport represents one of the few confidence-inspiring names in the broader air travel segment.

Per Gurufocus.com, ATSG rates as fairly valued. Against traditional metrics such as PE ratios, ATSG is basically middle of the road. That said, the company enjoys powerful income-statement-related metrics. For example, Air Transport’s three-year revenue growth rate stands at 20.3%, ranked better than 88% of its peers. On the profitability side, the company carries a net margin of 11%, above sector average. It also enjoys a return on equity of nearly 17%, reflecting a quality business.

Air France-KLM (AFLYY)

While the subject of this article is top airline stocks to buy, it’s also a relative theme. Arguably, analysts can make a case that no airliner offers a comprehensively convincing upside narrative. With global recession fears dominating headlines, it’s possible that sentiment for travel might erode. Nevertheless, if you have conviction in the contrarian framework, Air France-KLM (OTCMKTS:AFLYY) deserves consideration.

Currently, Air France features a market cap of $3.93 billion. Since the start of the year, AFLYY dropped an alarming 67%. I mention this because this is one of the top airline stocks to buy that’s not for the faint of heart. But on a fundamental basis, Air France can soak up demand from the more affluent segments of society as many European destinations are fully reopened. Plus, it’s important to note that the dollar and euro currently stand near parity. Effectively, this dynamic means that American tourism dollars can travel further than before.

Per Gurufocus.com, AFLYY rates as modestly undervalued. Notably, its price-sales ratio is 0.1 times, below the industry median of 1.02 times.

Aegean Airlines (AGZNF)

A lesser known but intriguing idea among top airline stocks to buy, Aegean Airlines (OTCMKTS:AGZNF) represents the flag carrier of Greece. In addition, Aegean is the largest Greek airline by total number of passengers carried, by number of destinations served and by fleet size, according to its corporate profile. Currently, the company features a market cap of 412.6 million euros (roughly equivalent to $406.9 million).

Since the start of this year, AGZNF finds itself down 14.3%, which isn’t that bad considering the broader circumstances. Moreover, as with Air France-KLM above, should travelers target European destinations because of the favorable (to Americans) exchange rate, Aegean may receive organic downwind benefits. Per Gurufocus.com, AGZNF rates as a modestly undervalued investment.

Of interest, Aegean features a price-to-owner-earnings ratio of 2.8 times, favorably below the industry median of 10.4 times. Perhaps most importantly, the company carries a return on equity of 30%, ranking better than 85% of its peers.

Deutsche Lufthansa (DLAKY)

Another name among the top airline stocks to buy that can benefit from European travel is Deutsche Lufthansa (OTCMKTS:DLAKY). Representing the flag carrier of Germany, when combined with its subsidiaries, Deutsche Lufthansa is the second-largest airliner in Europe based on passengers carried. Currently, the company features a market cap of $7.9 billion. Since the January opener, DLAKY declined a little less than 14%.

Per Gurufocus.com, DLAKY rates as a fairly valued investment. While the underlying firm can use some improvements overall, several splashes of positive data emerge. For instance, Lufthansa’s price-to-free-cash-flow ratio is 2.75 times, favorably below the industry median of 9.2 times.

Now, where the company starts to get questionable is its longer-term growth trek, which remains mired in negative territory. However, the fundamentals of European travel demand could correct this framework. For instance, in the company’s second quarter of 2022 earnings report, Lufthansa posted revenue of $8.95 billion. This represented a lift of 131% over the year-ago period. Thus, it might be too soon to give up on DLAKY.

Air New Zealand (ANZFF)

Air New Zealand (OTCMKTS:ANZFF) may very well be the worst of the top airline stocks to buy. That doesn’t necessarily mean you should avoid Air New Zealand like the plague. If you’re already interested in this sector, the company provides some positives to consider. However, it’s definitely on the speculative side of the spectrum.

As you might have guessed, Air New Zealand represents the flag carrier of the namesake nation. Per its corporate profile, the company operates scheduled passenger flights to 20 domestic and 32 international destinations in 18 countries, primarily around and within the Pacific Rim. At time of writing, Air New Zealand carries a market cap of 2.6 billion NZD (roughly equivalent to $1.5 billion). ANZFF lost 57.5% YTD, reflecting significant bounce-back potential.

On the financials, Gurufocus.com labels ANZFF modestly undervalued. The company features a Shiller PE ratio of 14.5 times, favorably below the industry median of 16.7 times. As well, it commands a gross margin of 79.5%, ranking better than 97% of the industry.

Nevertheless, the company will need a travel spark to the region to truly rebound. That’s the opportunity and the risk with Air New Zealand.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.