The World’s Largest Airliner Is This Week’s No. 1 Pick…
Summer is heating up, but so has inflation. The cost of virtually everything consumers buy from the hair salon to the frozen food aisle at their local grocery store has gone up. We’ve seen it while buying cars, gas, clothes, toys and pet food, among other things.
But with prices skyrocketing everywhere, people have still shown that they’re more than willing to pay more for airline tickets after having to either cancel and postpone travel while we all “rode out” COVID-19.
People are determined to take their “much-needed” vacations, but demand also picked up faster than most carriers anticipated…
Leisure and business flights climbed sharply last March to levels we haven’t seen in about three years as many destinations, like Hawaii, have eased up on entry requirements after the Omicron wave faded.
Ed Bastian, the chief executive of Delta Air Lines, told investors during the company’s first-quarter earnings call that “consumers have not been traveling over the past two years, so they’re prioritizing that spend now.”
“They’re looking for experiences,” he went on to say.
Of course, it is still too early to tell if people have just decided to book one last trip before having to tighten their purse strings or if air travel will remain strong throughout the rest of the year…
But given the massive level of pent-up demand and the fact that we’re prioritizing our vacation days, the second scenario seems more likely.
This week, I’m recommending a position in American Airlines Group Inc. (AAL), a stock that will benefit from the trends in travel.
We’ve sold covered calls on this stock before, but if you’re a new subscriber, American Airlines is the world’s largest airline when it comes to fleet size, scheduled passengers carried and even revenue passenger mile.
In its latest earnings report, the airliner posted a net loss of $1.6 billion for Q1 on revenue of about $8.9 billion. However, that’s more than double its $4 billion in sales from the same time period exactly one year ago.
American also revealed that its revenue finally surpassed 2019 levels for the first time in March and that bookings have continued to rise.
It also expects business travel to be 90% recovered to 2019 levels in Q2.
The airliner said on Tuesday that it performed reasonably well over the Memorial Day weekend. American operated a flight schedule that was 28% bigger than its closest competitors, Delta and United Airlines.
So far this year, shares of AAL have remained in a trading range between $13 and $21. I still see excellent income opportunities in the stock, which is why I believe we should buy back shares of the company to sell another covered call.
The stock makes a great long-term investment, but I’m recommending a trade of just 11 weeks to benefit from the summer travel months.
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