There were few industries that were hit harder by the COVID-19 pandemic than the airline industry. Flights were grounded for months on end, and commercial airliners put their cash reserves to the test. Fortunately, Canada’s top airliners were able to survive the generational health crisis.
Today, I want to discuss whether airline stocks are a good buy in August 2023. Let’s jump in.
Here’s why airline stocks are a good buy in the summer of 2023!
Top airliners predicted that it would take roughly three years to recover from the ill effects of the COVID-19 pandemic. Industry leaders have managed to beat expectations in this regard. Now, as it stands in the summer of 2023, airliners are ready to kick it into high gear.
Canadians and others across the globe have become starved for travel and leisure since being cooped up for months on end. Back in June, the United States Travel Association forecast domestic leisure travel growth of 2%, with volume growth that is expected to outpace inflation. Meanwhile, international outbound travel was upgraded due to very strong demand from the Canadian market. That bodes very well for our domestic airliners.
This is the first airline stock I’d consider snatching up in the summer
ONEX Corporation (TSX: ONEX) is a Toronto-based private equity firm that specializes in acquisitions and platform acquisitions. In December 2019, ONEX completed its acquisition of WestJet for roughly $5 billion. Shares of this airline stock have jumped 9.3% month over month as of mid-afternoon trading on August 4. Meanwhile, the stock has climbed 21% so far in 2023.
Investors can expect to see this company’s second batch of fiscal 2023 earnings on August 10. In the first quarter (Q1) of fiscal 2023, ONEX Corporation reported investing capital per fully diluted share growth of 4%. Meanwhile, the value of the company’s private equity investments was largely flat compared to Q4 fiscal 2022.
Shares of ONEX are trading in favourable value territory at the time of this writing. Moreover, this company boasts a fantastic balance sheet. This stock last paid out a quarterly dividend of $0.10 per share. That represents a very modest 0.50% yield.
Why Air Canada is still the ultimate airline and growth stock on the TSX
Air Canada (TSX: AC) is the largest commercial airliner in Canada. The company entered the 2020s on an incredible hot streak. It had railed off record revenues, passenger traffic, and earnings growth. That made the COVID-19 pandemic all the most devastating for shareholders. Air Canada saw its $50 valuation plunge below the $15 price mark. However, Air Canada has put together a solid rebound. Its shares have climbed 20% in the year-to-date period.
In Q1 2023, Air Canada achieved record passenger revenues of $4.08 billion — up 53% compared to the previous year. Meanwhile, Q1 operating revenues soared 90% to $4.88 billion. EBITDA stands for earnings before interest, taxes, depreciation, and amortization; this metric aims to get a clearer picture of a company’s profitability. This airline posted adjusted EBITDA of $411 million in Q1 — up from a negative adjusted EBITDA of $143 million in the prior year.
Air Canada offers attractive value compared to its industry peers at the time of this writing. This airliner is on the comeback trail, and it looks poised to ascend much higher in the quarters to come.
