Are Airline Stocks a Good Buy in 2025?

Airline stocks can be tricky investments. Airlines can provide insane growth potential, but they can also be extremely volatile options, best left to those with risk tolerance.

Are airline stocks a good buy right now? Here are three options to consider today.

Air Canada: Consistency resumes shortly

Air Canada (TSX:AC) is still recovering from its pandemic-era lows. Before the pandemic, Air Canada was a market darling with a decade of massive gains.

Those gains were a direct result of growing passenger traffic and, by extension, revenues. Following years of stale growth, the stock is overdue for an uptick.

As of the time of writing, Air Canada trades up over 13% in the trailing 12-month period, but still lags far behind the levels it traded at before the pandemic. The past few years have reminded investors that airlines are dependent on passenger traffic, global demand for travel and stable fuel costs.

If any of those are out of sync, the airline business model starts to track, which was evident in the most recent quarter.

In that quarterly update, Air Canada reported revenues of $5.186 billion, reflecting a 0.4% decrease over the prior year. The airline welcomed 10.4 million passengers in that period, reflecting a 0.4% decrease year over year.

Overall, Air Canada posted an operating loss of $108 million, or $0.40 per diluted share.

But does this mean airline stocks like Air Canada should be avoided?

Hardly. Air Canada, like the entire segment, is still volatile. Prospective long-term investors who can handle the risk can still grab shares of Air Canada at a hefty discount.

CargoJet: Delivery of growth comes standard

An alternative for prospective investors considering airline stocks is Cargojet (TSX:CJT). Ironically, the weak points noted regarding Air Canada can be perceived as strengths of Cargojet.

Unlike Air Canada, Cargojet hauls cargo rather than passengers. This jettisons the entire argument about passenger traffic (and the impact of a lack thereof, like we saw during the pandemic).

Instead, Cargojet operates a national network of air hubs across Canada and internationally. That global network serves as the largest overnight cargo operator in Canada.

That designation has also helped Cargojet become a key partner to online commerce giants. This provides Cargojet with a growing, recurring flow of overnight cargo, and by extension, revenue.

In the first fiscal of this year, that revenue amounted to a record $249.9 million, translating into an improvement of 8.1% over the prior period.  Overall, Cargojet posted net earnings of $48 million for the quarter, registering a 47% year-over-year improvement.

Adding to that appeal, Cargojet also pays out a quarterly dividend. As of the time of writing, the company pays out a yield of 1.50%, making it an intriguing option for investors looking at airline stocks.

Exchange Income: diversified, income-focused and growing?

One final option for investors considering airline stocks is Exchange Income Corporation (TSX:EIF). Exchange takes more of what makes Cargojet a great investment and pushes it to the next level.

Exchange is an acquisition-focused company, and its aviation business is only one part of the company. That other part is focused on manufacturing, providing products and services to niche parts of the market.

That niche appeal extends to the aviation side, too. Exchange operates over a dozen different subsidiaries in both segments. Both segments are diversified and generate cash for the company, making them ideal candidates for any portfolio.

As one of the airline stocks to consider, Exchange’s aviation businesses are equally well-diversified. They include both passenger and freight service, serving the niche markets that comprise Canada’s north.

That niche also includes businesses such as owning Canada’s largest flight school, as well as providing medevac services.

Finally, the cash-generating aspect of Exchange allows it to provide investors with a tasty, monthly dividend. As of the time of writing, the company pays out an impressive 4.26% yield and boasts annual increases going back over a decade.

Airline stocks: Will you buy them?

Airline stocks, including the trio mentioned above, carry risk. The above stocks offer growth, and in some cases, income, which offsets some but not all of that risk.

In my opinion, a small position in one or more of the above is warranted in a larger, well-diversified portfolio.