Airline Stocks Are Soaring Over The Negative Headlines, Lifted By Positive Earnings

“Lufthansa is back.”

Those are the enthusiastic opening remarks of Carsten Spohr, CEO of Deutsche Lufthansa, in the European airline’s earnings report for 2022, released today.

I think it would be just as accurate to say that commercial aviation in general is back, with attractive investment opportunities.

Spohr reported that Lufthansa, Europe’s largest carrier group by revenue, achieved an “unprecedented turnaround” in 2022 on the back of increasing demand for air travel. Revenue of USD$34.5 billion was almost double what it collected in 2021, while free cash flow came in at $2.6 billion, the highest annual amount in the German company’s history. Shares were up approximately 5.3% in intraday trading on the news.

Lufthansa went on to announce that it ordered 22 new long-haul aircraft from Airbus and Boeing, the company’s largest order since 2013.

As I’ve said before, as an investor, I like to see when a company invests in itself. It tells me that management is optimistic about the future and is positioning the company for growth.

That’s exactly what airlines are doing around the globe right now. According to Airlines for America (A4A), U.S. carriers are investing a record amount in new aircraft, equipment, information technology and more. Capital expenditures are forecast to hit $27.0 billion this year, which would be significantly higher than the $21.2 billion airlines are estimated to have spent in 2022.

More Bang For The Buck

Lufthansa’s blockbuster report is just the latest signal that commercial aviation, one of the hardest-hit industries during the pandemic, may be ready to make a landing again in investors’ portfolios.