7 Best Canadian Airline Stocks (Sep 2024): Travel is Back
About 4.5 billion people took advantage of commercial airlines in 2019.
This number dropped drastically in 2020 to 1.8 billion, but now with travel back, we should be approaching pre-pandemic numbers again.
The best Canadian airline stocks are an intriguing investment that investors can look into.
Best Canadian Airline Stocks
1. Air Canada Stock
- Ticker: AC.TO
- Niche: Commercial Airline, Cargo Airline
- Forward Dividend Yield: N/A
- Market Cap: $5.67 Billion
- Forward P/E Ratio: 5.78
Up until 1988, Air Canada was a crown corporation in Canada – a state-owned enterprise. It was privatized and rose to become the dominant airline in the country.
It suffered bankruptcy in 2003 but then reorganized and retained/regained its position as the top dog in the industry. It dominates both the international and national market share, though, in domestic air travel, Westjet (owned by Onex) is a close second.
The airline wanted to strengthen this dominance by acquiring another major airline, but the plans got derailed due to the pandemic and some regulatory challenges.
Air Canada stock saw a glorious growth spell spanning five years before the 2020 pandemic (Jan 2016 to Jan 2020), in which it grew by as much as 560%.
2. Cargojet Stock
- Ticker: CJT.TO
- Niche: Cargo Airline
- Forward Dividend Yield: 0.76%
- Dividend Payout Ratio: 9.67%
- Dividend Yield (12-Month Trailing): 0.93%
- Upcoming Dividend Date: Oct 04, 2024
- Market Cap: $2.16 Billion
- Forward P/E Ratio: 23.01
Cargojet is Canada’s premier cargo airline. It operates a fleet of 28 aircraft and has several local and international routes. Its time-sensitive overnight delivery business model and its stellar record when it comes to on-time arrivals make it an ideal partner for e-commerce businesses (among several others).
Its all-cargo fleet makes it different from carriers like Air Canada, which may use the same aircraft to carry both passengers and cargo. The company carries about 1.3 million pounds of cargo every night.
Cargojet stock is one of the best growth stocks in Canada. The share price grew over 1,800% between March 2012 and March 2022.
3. Exchange Income Corporation Stock
- Ticker: EIF.TO
- Niche: Airline Acquisitions, Diversified Airline Businesses
- Forward Dividend Yield: 5.08%
- Dividend Payout Ratio: 134.91%
- Dividend Yield (12-Month Trailing): 5.23%
- Upcoming Dividend Date: Sep 13, 2024
- Market Cap: $2.37 Billion
- Forward P/E Ratio: 12.63
Exchange Income Fund owns a decent number of airlines, mostly in Canada. It focuses on small, regional, and niche airlines and has one subsidiary that focuses primarily on medical travel.
But the stock’s true strength comes from a diversified portfolio of companies that includes aerospace companies, helicopter fleet operators, and many other businesses that have nothing to do with airlines at all.
This diversification allowed the company to bounce back from the pandemic brutalization in a way that no pure airline did.
The highlight of EIF stock is the dividends that the company maintained even through some very harsh economic times. But this dividend aristocrat may offer decent capital appreciation potential if you buy the dip and hold for at least a decade.
4. Chorus Aviation Stock
- Ticker: CHR.TO
- Niche: Regional Aviation Solutions
- Forward Dividend Yield: N/A
- Market Cap: $520.77 Million
- Forward P/E Ratio: 9.08
Chorus Aviation has a diversified business model. Its two main business segments are aircraft leasing and aviation services that it offers under the banner of Jazz Aviation and Voyageur Aviation.
The aviation business segment includes special missions, charters, etc. It has a decent-sized fleet of small, regional aircraft that it leases out to regional airlines around the globe.
However, its dividends were reason enough to consider this stock, but that reason was taken away from investors when the airline suspended dividends indefinitely in 2020.
5. Transat A.T. Stock
- Ticker: TRZ.TO
- Niche: Airline/Tour Operator
- Forward Dividend Yield: N/A
- Market Cap: $71.68 Million
- Forward P/E Ratio: -0.72
Transat is primarily a holiday air travel company. And even though most of the international air traffic is carried to international vacation destinations by Air Canada, the airline has carved a place for itself in the market.
It caters to a decent number of local and international destinations, and its reach is one of the reasons why Air Canada tried to take over it before the pandemic derailed the planes.
The glory days for the stock were between 2003 and 2007. Since then, the stock has offered sporadic growth phases, and they have been quite promising.
Between 2009 and 2020, the stock offered four upward trends, growing about 240%, 330%, 110%, and 245%, respectively.
The list of the best Canadian airline stocks ends here. We can try to stuff Onex and CAE on this list, but even though Onex owns the second-largest Canadian airline, it’s just one of its holdings, and the stock is not defined by it. And CAE is more about training and simulations than actual airline services.
However, you may be open to investing in some US airlines, and there are two US airline stocks that you should definitely look into.
6. Delta Air Lines (NYSE)
- Ticker: DAL
- Niche: Commercial Airline
- Forward Dividend Yield: N/A
- Market Cap: $29.29 Billion
- Forward P/E Ratio: 6.19
Delta Air Lines is one of the largest airlines in the US by market cap. It operates about 5,000 flights every day and reaches 265 destinations around the globe. It has a long and proud history and has been in operations since 1925.
Thanks to its strong cargo business, the airline also has slightly more resilience against events like COVID.
While not a very compelling growth stock, Delta Air Lines offered one of the best capital appreciation potentials in the US airline sector.
And in a normal market where business and leisure air travel is at optimal levels, Delta can be considered one of the best airline stocks from the US.
7. American Airlines Group Stock (NASDAQ)
- Ticker: AAL
- Niche: Commercial Airline
- Forward Dividend Yield: N/A
- Market Cap: $7.22 Billion
- Forward P/E Ratio: 5.91
The American Airlines Group is massive. It runs almost 6,700 flights daily and caters to about 50 countries and 350 international destinations.
And if you add the Oneworld alliance (of which the airline is a founding member) to the mix, the reach of this group becomes significantly more extensive.
The fleet is quite massive and diverse and includes planes from not just Airbus and Boeing but also Canadian Bombardier and Brazilian Embraer.
The stock is quite young compared to the other airline stocks in the country. It offers decent cyclical growth.
Airline Stocks – Risky Or Profitable?
Airline businesses, while usually healthy, are susceptible to certain global/regional issues. Two powerful examples of the factors or issues that can adversely impact airline businesses are war/terrorist activities and a pandemic.
The first usually impacts specific regions, while a pandemic, especially a global one like COVID, has the power to hit the entire airline industry.
Part of it may simply be the low demand, but it’s also because of how expensive the airline business is.
Thanks to the safety requirements, the cost of aircraft, relevant equipment, training of the staff, and support resources, all are significant steps up from other transportation modes.
The high operational cost is not an issue when there is enough demand for flying the bulk of the fleets at full capacity. But when the demand is low, it triggers a huge cash burn.
Airlines around the globe burned through millions of dollars a day during the pandemic, depleting their cash piles for decades, and had to seek liquidity just to remain operational.
Conclusion
Even the best Canadian airline stocks might be dead weight in your portfolio if you ignore their limitations and market realities and expect decent returns when they are financially devastated.
However, if you are willing to stick to the stock’s long-term, then buying these stocks when they are downtrodden can be transformational for your portfolio.
If airline stocks are not your cup of tea in the current market conditions or in general, then you may consider sticking to the best stocks that the TSX has to offer.