Airline stocks have evidently been one of the worst affected sectors of the coronavirus pandemic. With heavy restrictions on travel, airlines have been forced to ground their fleets, part ways with a host of their workers and receive government loans to bail them out. But this has left these airline stocks extraordinarily cheap. Therefore, I’d consider buying the following three.
A high-growth airline stock
Wizz Air (LSE: WIZZ) is the first airline stock that piques my interest. The FTSE 250 member is a low-cost airline that is the market leader in Central and Eastern Europe. It has seen tremendous growth over the past few years, with operating cash flow jumping from c.£178 million in 2015 to c.£421 million last year.
Although Wizz Air passenger numbers have fallen by 98% recently, it is still in a strong position to survive the crisis. Unlike other airline firms, Wizz Air has avoided buying back shares or paying a dividend. This has helped provide liquidity to deal with the crisis and I can certainly see a long-term recovery.
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A multinational FTSE 100 airline
International Consolidated Airlines Group (LSE: IAG) is the owner of airlines such as British Airways, Iberia and Aer Lingus. IAG shares have been damaged more significantly than other airline stocks, falling by around 70% since February. Management has also stated that passenger demand will not return to 2019 levels for many years.
But I’m confident that IAG will survive the crisis, albeit in a slightly damaged form. The airline has attempted to preserve funds by announcing job cuts, grounding the majority of its fleet and cancelling its dividend. At the end of the first quarter, IAG also had total cash and undrawn facilities of c.€9.3 billion. Whilst I don’t see IAG thriving over the next few years, I still believe that there will be a major recovery from its recent lows.
A British low-cost airline
The final airline stock to consider is easyJet (LSE: EZY). This FTSE 100 firm has also taken a battering due to coronavirus, and easyJet shares have fallen by over 65% since February. This has been exacerbated by disputes between the founder, Sir Stelios Haji-Ioannou, and the easyJet board. This has revolved around the company’s £4.5 billion deal with Airbus for 107 planes.
Even so, I am confident that easyJet will survive the crisis. For example, it has managed to secure a £600 million from the Treasury and will also borrow another £407 million from commercial creditors. This means that it should be able to survive at least nine months without flying. With a price-to-book value of 0.7, the airline stock is also extremely cheap and offers an opportunity to investors.
This means that I view each of these airline stocks as a long-term buy. For risk-averse investors, these stocks are simply too volatile to touch. But whilst the short-term direction of these stocks is impossible to predict, I believe that they will all be able to recover over the next few years.
