Benzinga: Three airline stocks to buy on the dip during the federal government shutdown.

The federal government has been in a shutdown for more than three weeks, approaching the longest shutdown record in history. The impact of this shutdown varies across different industries, including real estate, defense, and air travel. Among these, air travel has been particularly affected, with passengers facing longer security check lines, reduced air traffic controllers, and increased flight delays. Sharon Amos, director of Air Ambulance 1 in Houston, Texas, and an aviation expert, stated that there is no doubt the government shutdown has a significant impact on the aviation industry, as the operational capacity of the Federal Aviation Administration (FAA) and air traffic controllers has decreased, leading to more frequent flight delays and cancellations. In addition to affecting flight schedules, the shortage of personnel and longer security check times have also increased many operations.

Paul Holmes, a senior analyst at BrokerListings in New York City, believes that a government shutdown would essentially halt the FAA's inspection certifications and hiring processes, ultimately putting tremendous pressure on the personnel of air traffic control and the Transportation Security Administration (TSA). In this scenario, domestic flights in the U.S. would be the most affected, with flight delays, cancellations, and a blow to passenger confidence impacting the revenues and profit margins of airlines.

Overall, airline stocks performed poorly during the U.S. government shutdown, especially during the standstill period, with the U.S. Global Jets ETF (NYSE: JETS) dropping 6.16% in the past 30 days. Nevertheless, as many airline stocks fell due to the government shutdown, Benzinga analysts still see opportunities, highlighting three U.S. airline stocks that they believe are good buying opportunities at current lows. Pure market observation, not any investment advice.

Delta Airlines (NYSE: DAL)

Delta Airlines (NYSE: DAL) stock price has fallen nearly 3% in the past week, but its long-term outlook is improving. The company recently announced an annual earnings per share expectation of $5.25 to $6.25, with anticipated cash flow reaching $3 billion to $4 billion. Overall, analysts seem to hold an optimistic view of Delta Airlines' stock, with several analysts giving it a “strong buy” rating.

Among the 21 airline industry analysts tracking the sector, 19 gave a “strong buy” rating this month. Additionally, Delta Air Lines holds a favorable position in the U.S. market and is expected to rebound quickly after the government shutdown ends, thanks to its strong brand.

Analyst Paul Holmes is optimistic about Delta Air Lines because of its strong international route capabilities, which means it is less reliant on U.S. routes affected by the government shutdown. They also have a solid frequent flyer program, which helps to mitigate temporary impacts. The average target price range given by analysts is between $70 and $74 per share (Delta Air Lines' current stock price is about $59 per share), and he believes that Delta Air Lines offers significant upside potential for airline industry investors.

American Airlines (NASDAQ: AAL)

American Airlines (NASDAQ: AAL) stock price is about $13 per share, despite a 26.7% drop this year. While the government shutdown has exacerbated short-term risks for American Airlines, as is the case for all U.S. airlines affected by the shutdown. However, according to the forecast by the American Airlines Transportation Association (ATA), considering the upcoming year-end holidays and the expected significant increase in air travel demand by 2026, the airline's stock price may be undervalued. JPMorgan recently raised its target price from $17 per share to $20.

Southwest Airlines (NYSE: LUV)

Facing challenges brought by the government shutdown, Southwest Airlines (NYSE: LUV) saw its stock price drop nearly 5% over the past week. Analysts believe that Southwest Airlines has lower downside risks as it is the largest passenger airline in the United States, with a fleet of 800 Boeing 737 aircraft. Investors should also be able to accept that the stock has limited upside potential, as Southwest Airlines is generally considered a more conservative choice and may not yield significant returns. Another attractive aspect of Southwest Airlines is its low debt and strong balance sheet, which Holmes points out makes it a quality airline worth holding during the current economic cycle, as it should be able to relatively effectively withstand market fluctuations.

Investors in airline stocks should pay close attention to key risks before making aggressive investments. Focus on the progress or stagnation of government shutdowns, fuel prices, labor cost trends, travel demand indicators, such as the operational status of the Transportation Security Administration (TSA), as well as corporate travel trends, even during government shutdowns. Additionally, setting an investment horizon when investing in airline stocks is also a good idea; typically, the trading cycle for buying airline stocks on dips is usually 6 to 18 months, primarily due to operational and economic issues, so do not view this strategy as short-term trading.

This article by Benzinga: Three airline US stocks to buy on dips during the federal government shutdown, originally appeared in Chain News ABMedia.