The 3 Hottest Airline Stocks to Consider Before Summer Travel Starts to Sizzle

Stocks to buy

Travel demand is accelerating with major sector names reporting strong demand ahead of the key holiday period, underscoring the potential of airline stocks to buy before summer. Last week, Booking.com said it expects to see strong travel demand despite the slowdown in certain regions, namely the Middle East.

Booking.com said it expects room-night growth to increase between 4% and 6% year-over-year. Moreover, the gross travel bookings are expected to rise 3-5%. Overall, the company’s  first-quarter results indicated strong demand, particularly in Europe, which is the key market for this company. 

According to Airports Council International (ACI) World, the global air passenger volume is now near pre-pandemic levels. The first bi-annual air travel demand update of 2024 indicates that the current projection for global passenger volume in 2023 stands at approximately 8.7 billion. 

This figure represents 95% of the 2019 level, marking a 31% year-on-year growth from the volume recorded in 2022. The estimates provided by ACI World are based on comprehensive data drawn from over 2,600 airports in more than 180 countries and territories. 

According to the World Airport Traffic Forecasts (WATF) 2023–2052, the baseline scenario before the COVID-19 pandemic estimated that global passenger volume would hit 10.5 billion in 2023, which is 119% of the 2019 level. However, the current projection falls short of this pre-COVID-19 baseline scenario, yet it still shows significant recovery.

By October 2023, total passenger traffic had risen by 28% year-on-year, reaching 93% of the October 2019 year-to-date level. The domestic market saw a 21% increase from the previous year, achieving 97% of the 2019 figures, while the international market led the recovery with a 38% year-on-year growth, reaching 88% of the 2019 level.

Looking forward, global passenger traffic in 2024 is expected to exceed the 2019 figures for the first time since the onset of COVID-19. The forecast predicts a total of 9.7 billion passengers, which is 106% of the 2019 level, with a 12% year-on-year growth rate. However, the growth rate is anticipated to slow down in the following years as the market stabilizes from the pandemic’s impact.

Here we take a look at the three hottest airline stocks to buy before the summer season. 

Booking.com (BKNG)

Source: Denys Prykhodov / Shutterstock.com

Booking.com (NASDAQ:BKNG) is a leading online travel agency known for offering a wide range of travel services, including accommodations, flights, car rentals, and restaurant reservations.

89% of the company’s total revenue comes from non-US travel, which makes it a key beneficiary of strong demand for international travel. Booking.com reported that room nights booked in the three months ending March 31 grew by 9% to 297 million, exceeding analysts’ expectations. 

Gross travel bookings reached $43.5 billion, also surpassing projections, and the company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $898 million, well above the expected $718.6 million. 

Adjusted earnings per share were reported at $20.39, compared to the $13.98 estimate by analysts. Furthermore, the board declared a cash dividend of $8.75 per share, payable on June 28.

Shares of Booking Holdings rose by 5.3%, climbing to $3,657.09 from a previous close of $3,472.91 after analysts raised their price targets, reflecting renewed confidence in the company’s growth prospects.

Booking.com stock is up by 9% year-to-date.

Ryanair (RYAAY)

Source: Shutterstock

Ryanair (NASDAQ:RYAAY), a prominent low-cost airline based in Ireland, specializes in budget travel across Europe and to select international destinations. Known for its cost-effective pricing model, Ryanair facilitates international travel by connecting a vast network of routes, making it a popular choice for travelers seeking affordable options. As such, it stands out as one of the top airline stocks to buy before summer.

Ryanair recently announced a significant expansion plan that will introduce 169 new routes, expanding its network to a total of 2,600 routes across Europe and North Africa, positioning itself as a key player in the global travel industry. 

This growth strategy includes the launch of domestic operations in Morocco, where the airline will connect 11 different destinations. With the aviation industry facing reduced schedules due to ongoing Pratt & Whitney engine issues affecting several major airlines, Ryanair anticipates a sustained demand for air travel. 

MakeMyTrip (MMYT)

MakeMyTrip (NASDAQ:MMYT) is an Indian online travel company providing travel products and solutions. Founded in 2000, it offers services like flight tickets, domestic and international holiday packages, hotel reservations, and rail and bus tickets, making it a comprehensive travel portal in India’s rapidly growing travel market.

A few months ago, MakeMyTrip reported all-time high quarterly gross bookings, revenue and net profit for its third fiscal quarter. The firm’s net profit soared to $24.2 million, a massive rise from the $0.2 million reported in the same quarter of the previous fiscal year. 

Revenue under International Financial Reporting Standards (IFRS) climbed by 26.9% in constant currency terms to $214.2 million, up from $170.5 million in the same period last fiscal year. The operating level saw EBITDA, which stands for earnings before interest, tax, depreciation, and amortization, leap by 105.6% to $29.4 million, compared to $14.3 million in the prior year’s corresponding quarter.

The gross bookings for MakeMyTrip experienced a year-on-year increase of 21.7% in constant currency, reaching $2.088 billion in the third quarter of the current fiscal year, up from $1.738 billion in the same quarter of the previous fiscal year.

On the date of publication, Shane Neagle did not hold (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.

Shane Neagle is fascinated by the ways in which technology is poised to disrupt investing. He specializes in fundamental analysis and growth investing.

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