Given the additional surge in travel this summer due to the Olympics in Paris, you might want to consider airline stocks to buy that should benefit from the sporting event.
Lots of Americans will be heading to the 2024 Summer Olympics, which runs from July 26 through August 11. According to the travel marketing platform Sojern, bookings to Paris are up 125% for the 16-day period from the same time a year ago, with Americans accounting for nearly one-quarter of the bookings to Paris between July 26 and August 11. The second-highest country is Canada, although it is a distant second at 6.0% of the bookings.
According to Sojern, when Qatar hosted the 2022 World Cup, the number of searches after the event ended increased between 79% and 255%. This suggests France will continue to reap the rewards long after the Olympic torch has been extinguished.
So, it makes sense that the airline stocks to buy should have plenty of flights to Paris and other parts of France. Based on this theory, my three ideas for riding the Olympic excitement to profits are here.
Airline Stocks: Delta Air Lines (DAL)
Delta Air Lines (NYSE:DAL) stock is up over 19% in 2024. It traded at $53.86 in mid-May before falling back into the high $40s in June.
According to Simple Flying, Delta has 966 flights in June to both Charles DeGaulle (CDG) airport in Paris and Nice Côte d’Azur Airport (NCE), with options to fly from nine major U.S. cities, including flights to both French cities from Hartsfield-Jackson Atlanta International (ATL) and John F. Kennedy International Airport (JFK) in New York.
Delta’s June flight count to France was more than double that of second-place United Airlines (NASDAQ:UAL), which I cover below.
It just so happens that Delta is my favorite U.S. airline stock. In May, I suggested that DAL was one of the best $50 stocks to buy this Spring. It was trading around $52.62 at the time, just days from hitting its 52-week high.
It’s not great timing on my part, but you can’t fault my rationale.
“Regarding management, they have top talent. CEO Ed Bastian isn’t just one of the best airline executives; he’s one of America’s best CEOs,” I wrote on May 9.
Based on an enterprise value of $53.34 billion and $3.5 billion in projected free cash flow, its free cash flow yield remains an attractive 6.5%.
United Airlines (UAL)
United Airlines offers 424 flights to CDG and NCE airports in France from four U.S. cities, including flights to Paris and Nice from Newark. Other airports offering flights to the Olympics include Dulles International in Washington, D.C., Chicago O’Hare International Airport, and San Francisco International Airport.
American Airlines (NASDAQ:AAL) has almost as many at 401, but United is, in my opinion, the better business of the two.
MarketBeat recently highlighted that May had a record number of daily passengers, according to the TSA (Transportation Security Administration), with UAL holding nearly 10% of the U.S. domestic market.
In Q1 2024, United reported that its PRASM (Passenger Revenue per Available Seat Mile) in Europe was up 12% compared to a year ago. Its revenue in Europe was $1.41 billion in the quarter, up 11.7% from Q1 2023. Its European revenue represented 12% of total first-quarter sales.
InvestorPlace’s Ian Cooper reminded readers that Citi analysts upped their price target on UAL stock by 20% to $96 with a Strong Buy rating. The airline’s key metrics are all moving in the right direction, and 20 of the 22 analysts covering its stock rate it a Buy with a $69.20 target price, 43% higher than where it’s currently trading.
Amazingly, UAL stock trades at just 4.8x its 2024 EPS estimate of $10.09 and 4.2x the $11.45 2025 estimate.
Air France-KLM (AFLYY)
Air France-KLM (OTCMKTS:AFLYY) is made up of three airlines: Air France, KLM Royal Dutch Airlines, and Transavia, the company’s low-cost airline. Its fleet of 551 aircraft flies to over 300 destinations worldwide. In 2023, it transported 94 million passengers.
In March, Air France announced that it was boosting its service from the U.S. to Paris to meet the surge of Americans heading to the Olympics in July. It brought back its daily Minneapolis/St. Paul (MSP) to CDG route May 13.
In addition, it increased its service from Raleigh-Durham (RDU) to Paris from three times weekly to daily. That route only started last October, so clearly, it’s been a success for the airline.
“Air France expects to carry 15% of Olympic athletes, 35% of Paralympic athletes and 13% of the members of the ‘Olympic family,’” stated its June 11 press release.
“Up to 125,000 customers per day are expected on board the company’s flights during this period, with travel peaks before and after the opening and closing ceremonies.”
Disruption costs resulting from geopolitical tensions and lower cargo revenue caused a 38% decline in its EBITDA in the first quarter to 176 million euros ($188.3 million). However, its revenues increased 5% in the quarter to 6.65 billion euros ($7.11 billion).
The company’s net debt is a low 1.3x EBITDA in the 12 months ended March 31.
On the date of publication, Will Ashworth did not have (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.
