Can airline investing fly?

“I like airlines”, said Warren Buffett, last year. Should private investors like them too? And which ones?

Article updated: 22 March 2018 5:00pm Author: Michael Baxter

Virgin Atlantic just made a loss. It blamed technical faults with the engines of some of its aircrafts, meaning that throughout much of last year they were not in use, the severity of the hurricanes and falls in sterling, hitting UK’s travelers’ affordability. It says that 10 per cent of its fleet were grounded throughout most of 2017. Losses were £48.5 million, from a £187 million profit the year before.

Shares in Virgin Atlantic are not listed on the stock market - but you can invest in Delta which owns 49 per cent and Air France KLM which is expected to buy a big chunk of Sir Richard Branson’s stake and which will give it a 33 per cent share.
But this begs the question why should you invest in airlines and which ones?

Why?

It used to be a well-known little saying: ‘there is no money in aviation’. But Warren Buffett has a different take. Last year he said: “It's true that the airlines had a bad 20th century. They're like the Chicago Cubs. And they got that bad century out of the way, I hope.” Well, I have it on good authority that airlines didn’t make so much money in the 19th century either. The first airline I have ever heard of was a disaster - it consisted of two solo flights, but while one, flown by a pilot called Daedalus, went okay, the other, flown by his son Icarus, went too close to the sun and crashed to earth.

More recent airlines have had quite different experiences.

Listen to the wise man

Investors can do a lot worse than listen to Warren Buffett. He said: “I think there have been almost 100 airline bankruptcies. I mean, that is a lot.” But “I like airlines because they just got a bad century out of the way.”

He has invested in American Airlines, United Continental Holdings and Delta Airlines - so one way to invest in Virgin Atlantic is to invest in Mr Buffett’s choices - and via Delta you have got your stake.

Invest in the best

I am a great believer in investing in companies you like and know quite a lot about as a customer. If there is an airline you rate highly, as a user, you can buy shares in it, and if it passes all the other tests, strong balance sheets, etcetera, then that may be a pretty good starting point.

But if you are like me, and you don’t take to the skies that often, or, if you do but don’t have a favourite airline, then you could do a lot worse than find out what customers think.

According to Business Insider, the best airline in the world, based on customer reviews, is Qatar, followed by Singapore Airlines, All Nikon Airlines, Emirates and Cathay Pacific.

You could of course look at TripAdvisor reviews. The top European airlines according to TripAdvisor are Aeroflot, Turkish Airlines KLM, Lufthansa, Swiss, Virgin Atlantic, Finnair and Austrian Airlines.

Qatar Airlines is state owned, but I have taken a look at some of the best European airlines according to TripAdvisor. The Turkish Airlines share price is up roughly three-fold in the last five years, KLM is part of Air France KLM – shares flattish over the last five years, and Lufthansa has seen shares rise by around two thirds over the last five years. Aeroflot is up by a third. Not all the shares are easy to buy, but Aeroflot is listed on the Frankfurt exchange.

Of course, you could always forget about customer opinion - and just go for the old faithfuls EasyJet and Ryanair. Shares in Ryanair are up two and a half-fold over the last five years, EasyJet is up by a third.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

See what else we have to say