The years following the COVID-19 pandemic have seen a resurgence in travel demand, with global populations returning to air travel. While promising for many aviation companies, this rising trend could slow or reverse in the face of a global recession. With both the United Kingdom and Japan going into official recessions this year, the US could be next. Therefore, investors might want to begin considering which aviation stocks to sell in the event of a crash.
However, not all aviation stocks are equal, with some able to weather a crash, whereas others are already in bad shape. To evaluate which aviation stocks may not be able to hold their value investors should look at two factors. These are the current market competitiveness and the overall quality of products and services provided by the company. As such, here are three aviation stocks that may not be financially healthy enough to survive the next recession.
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Following a failed merger with budget competitor Spirit Airlines, JetBlue (NASDAQ:JBLU) has struggled to find its footing in recent months. For the airline company, a merger with Spirit would have broadened its fleet alongside affordable routes for a wider population of travelers. Since the failed merger, the company’s financial results for 2023 showed a net income loss of $103 million as well as a 3.73% revenue decrease.
Due to this financial contraction for the company, JetBlue has recently begun cutting many of its less profitable routes in an attempt to downsize costs. Though in the short term, this type of restructuring of routes can provide financial relief to the airline it can often lead to a significant loss of long-term customer recruitment.
Should the US economy enter a recession, the decreased demand for JetBlue’s existing routes plus an inability to capture new customers due to discontinued routes could combine to deal JBLU stock a significant blow.
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Though I previously recommended Boeing (NYSE:BA), the company has been in the news for all the wrong reasons. Between aircraft mishaps, inspection misses, and public scrutiny, Boeing stock has had a rough few months. While the company is still booking and delivering orders, these reputational losses will not bode well for its future.
As Boeing’s reputation suffers, its competitor Airbus looks all the more attractive to airline companies and cargo providers alike. In the case of a recession in the United States, Boeing could suffer for two major reasons. The first is the potential for budget cuts to the different programs that Boeing currently supports. The second is the decreased demand for airliners in times of low revenue for airline companies.
As the controversies mount, the departure of Boeing CEO Dave Calhoun signals a shake-up in the company’s current leadership. Boeing will need to turn things around quickly to stay steady through a potential recession.
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When discussing aviation stocks to sell, it may surprise some that Lufthansa (OTCMKTS:DLAKY) might not have the brightest future ahead. From striking pilots to lackluster services, Lufthansa’s pedigree as a premier European airline has declined over the last decade.
Even more concerning is the EU Commission’s current objection to the German airline’s plans to take over Italy’s ITA Airlines. This is due to the EU’s strict guidelines regarding antitrust activity. Thus, Lufthansa’s plans to expand routes across Europe could be in peril.
Another major issue for Lufthansa lies in the changing nature of European air travel. Today, budget airlines like Ryanair and Wizz Air are outcompeting Lufthansa for routes due to offering better value. Should a global recession hit, it’s unlikely that Lufthansa will maintain its price as travelers turn to more cost-effective airlines.
On the date of publication, Viktor Zarev 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.
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