Are airline stocks cheap for 2022?

It’s no secret that airline stocks have been hammered over the past couple of years (thanks a lot, Covid-19). I reckon 2022 is going to be one of renaissance for the airline industry, though. I think some tidy profits are up for grabs from investing in what are, from my viewpoint, cheap airline stocks. 

An uplift in airline share prices can already be seen since the turn of the New Year, with IAG up around 12%, Easyjet 11%, and Wizz Air 13%, at the time of writing. Personally, I think there is scope for further movement upwards and so I’m pondering which airline stocks will fit well into my portfolio.

Why I think airline stocks still look cheap

There seems to be an upbeat mood around not just the UK but Europe in general at the moment. The potential for disaster promised by the Omicron variant hasn’t materialised and I certainly hope that will remain the case. This is good news for the markets, of course, with the FTSE 100 easing nicely into 2022.

I’m strongly of the view that stocks for companies in leisure and travel are going to do well this coming year, predicated on the idea that we’ve seen the worst of Covid-19.

I don’t want to jump the gun of course. I appreciate that government advice around Europe is that we’re still in the midst of a pandemic, and that we shouldn’t count our chickens. But really, do you think we’re going back into full scale lockdown any time soon? I know I don’t think that. 

Travel stocks – and in particular airline stocks – look like a cheap investing opportunity to me. I’ve already written positively about IAG elsewhere, but my optimism from that article extends to the general airline industry.

Vaccine take-up is pretty high right across Europe. This safer environment helps to encourage more international travel. Furthermore, when I reflect on my own experience of travelling internationally during the pandemic I know the passenger experience has improved immeasurably over the last six months or so.

Improved customer experience

During the Christmas period I flew with Aer Lingus, a renowned brand under the IAG banner, and I didn’t have a moment of delay or trouble. Like other passengers I was encouraged to use the ‘Verifly’ app. This ensured I had cleared all Covid-19 checks before I got to the airport. The in-airport experience was great as a consequence. It certainly wasn’t chaotic like when travelling throughout much of 2021.

I know this is only my own personal experience, but when combined with the anecdotal evidence of friends it does suggest that airlines are learning and adapting to customer needs. This is great to see, and I think it will help encourage increased passenger numbers.

When I align the improved customer experience with my belief that more people are simply going to want to travel again in droves in 2022, I can’t help but think airline stocks remain cheap. The question for me now is which particular stock do I want to add to my portfolio!