Investors continue to pour money into airline stocks as the government eases COVID-19-related lockdown measures, which in turn is boosting air travel. In fact, many U.S. states lifted restrictions imposed to counter the spread of the virus just in time for the Memorial Day holiday weekend.

 

STR senior vice president Jan Freitag added that “all 50 states have at least partially reopened, so slow weekly demand growth should continue with more leisure activity around the country.”

 

Talking about air travel, data from the Transportation Security Administration (TSA) showed that daily average of travelers that went through TSA checkpoints during the week ended May 23 increased to 262,734, the highest since the week ended Mar 28. And on May 22, ahead of the Memorial Day weekend, 348,673 travelers passed TSA checkpoints, the highest since Mar 22 and four times higher than the lows of 87,000 hit in mid-April. 

 

By the way, airlines’ improved cash flow and cost-control measures helped them with enough capital to tide over the crisis, and now with improved traffic, things are certainly looking up for airliners. Notably, airlines have always done well during a crisis. For instance, in the six months following the 9/11 terrorist attacks, the 2003 SARS outbreak and the 2008-09 financial crisis, airline stocks surged around 80% to 120%.

 

Lest we forget, the government is currently helping airliners stay afloat amid the pandemic. In a positive move, the U.S. Treasury Department and major U.S. airlines reached an agreement on principle aimed at curtailing layoffs. Notably, 10 of the top 12 U.S. carriers have agreed to accept federal aid in exchange for allowing the department to have a small ownership stake.

 

In other words, the grant will include a mix of cash and loan, with the government getting warrants from carriers that can be converted into small ownership stakes in some of the leading airlines. The major carriers, in fact, will receive 70% of the funds in cash that need not be paid back. But the rest 30% of the assistance needs to be repaid.

 

Nonetheless, shares of U.S. carriers soared as much as 16% on May 26 as COVID-19 restrictions ease, allowing flights to take off. The U.S. Global Jets exchange-traded fund rose 11.8%, marking its second-best day since April 2015. In fact, the Jets ETF has now jumped a whopping 91.1% since finishing at a record low of $8.01 on May 15.

 

 

Given the aforesaid bullishness, we have highlighted five best U.S. carriers whose shares have not only gained 10% or more on May 26 but are also in a pretty decent shape fundamentally.

 

Prominent among them are United Airlines Holdings, Inc. (UAL Quick QuoteUAL - Free Report) , American Airlines Group Inc. (AAL Quick QuoteAAL - Free Report) , JetBlue Airways Corporation (JBLU Quick QuoteJBLU - Free Report) , Delta Air Lines, Inc. (DAL Quick QuoteDAL - Free Report) and Alaska Air Group, Inc. (ALK Quick QuoteALK - Free Report) , whose shares climbed 16.3%, 14.9%, 14.3%, 13.1% and 12.9%, respectively, on May 26.

 

United Airlines’ cost-controlling measures like freezing hiring and delaying salary increases benefitted the company amid the pandemic. Low fuel prices also helped the company partly offset the drop in demand due to coronavirus. The company’s expected earnings growth rate for the next five-year period is 12.5%.

 

With passenger revenues dwindling due to the pandemic, American Airlines’ focus on operating cargo-only flights is a positive and should boost its top line. The company’s expected earnings growth rate for the next five-year period is 5.8%.

 

While low fuel cost certainly bodes well for JetBlue, the company’s liquidity position is impressive. The carrier exited the first quarter with cash and equivalents of $1799 million, compared with $1328 million at the end of the fourth quarter of 2019. The company’s expected earnings growth rate for the next five-year period is 22.1%.

 

Meanwhile, modest fuel prices should provide support to Delta Air Lines. The company’s cost-cutting initiatives, including halt to hiring and offering voluntary leave options to employees, helped make up for the slump in travel demand. The company’s expected earnings growth rate for the next five-year period is 6.8%.

 

Alaska Air’s move to strengthen its financial position by reducing its monthly cash burn rate to $260 million in May from $400 million in April is noteworthy. The company’s expected earnings growth rate for the next five-year period is 14.6%.

 

United Airlines, American Airlines, JetBlue Airways, Delta Air Lines and Alaska Air currently have a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

 

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