Spirit, Delta, American & United Are Barclays' Top Airline Stocks

Despite recent turbulence in airline stock prices, Barclays analyst David Fintzen released a report this week that discussed the firm’s continuing bullish stance on airline names. Fintzen explains that profits in the industry are here to stay, and several big-name airline stocks offer compelling valuations following recent pullbacks.

Simple Thesis

According to Fintzen, many of the recent concerns and headwinds for the airline industry pose little by way of long-term threats to the underlying fundamentals of the business. “Directionality, ‘capacity creep’, larger aircraft with more seats, a weak economy, low fuel and strong dollar has tarnished the simple, and perhaps overly simplistic airline thesis,” he explains.

Fintzen believes that consolidation and cost restructuring in the U.S. airline industry has put the group in a position to sustain higher margins in the long run and perhaps even remain profitable during the next economic downturn.

New Attitude

In the past, airlines have operated within an industry structure that was flawed. However, modern airlines are leaner, operations have been streamlined, and operators are consistently booking profits like never before.

In addition, Barclays sees a relatively even playing field among the industry’s biggest names and doesn’t see any companies currently holding much of a competitive advantage over peers. Barclays' outlook for capex budgets and limited capacity expansion throughout 2016 indicates just how much the industry has changed in recent years.

Stock Picks

Barclays names Spirit Airlines Incorporated SAVE its top airline stock pick, followed by Delta Air Lines, Inc. DAL, American Airlines Group Inc AAL and United Continental Holdings Inc UAL.

The U.S. Global Jets ETF JETS is down 10.2 percent over the past month.