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Canadian investors may find they have two perfectly satisfactory options here at home when it comes to airline stocks: legacy carrier Air Canada, in the midst of a profound turnaround, and longtime growth name WestJet.

Whether they know it or not, however, Canadians are buying in to the airline stocks south of the border. The Canada Pension Plan Investment Board was an aggressive buyer of U.S. airlines in 2015's first quarter, nearly doubling its investment from year-end 2014, according to the pension's U.S. regulatory filings. The pension plan owned just under 2 million shares in the major U.S. airlines at Dec. 31, 2014, worth under $100 million. By March 31, it had pushed its holdings to 3.5 million shares worth $173 million, the filings show. (Those amounts are offset by derivatives and other hedges that prompt the pension fund to put a value of just $125 million (Canadian) on the positions, as of March 31.)

By contrast, its domestic-airline investment was $44-million (Canadian) in Air Canada and WestJet as of March 31.

CPPIB won't comment about its investment decisions, so we're just left to guess at what's up. But in all likelihood, it's more evidence that pension-fund managers, who invest for the long term, are buying into the thesis that the United States' airline industry can eschew its destructive, value-destroying ways of the past and create franchises that reward shareholders over the long haul.

Certainly, CPPIB's purchases represent just a small part of the portfolio: The pension plan had $264.6-billion in assets as of March 31.

U.S. filings show CPPIB raised its stake in Delta Air Lines Inc. by 60 per cent. It more than doubled its position in United Continental Holdings Inc. It increased its position in American Airlines Group Inc. fivefold. And it added 25 per cent to a large Southwest Airlines Co. position. (CPPIB declined to release the hedged values of its positions as of Dec. 31, making quarter-to-quarter value comparisons impossible.)

It's not the only Canadian pension plan making the airlines bet: Caisse de dépôt et placement du Québec doubled the value of its holdings, from $33.9 million (U.S.) as of Dec. 31 to $65.6-million as of March 31, opening up a $16.7-million position in American and doubling its holding of Delta to $40 million. It trimmed a Southwest position over that time. (Caisse had $226-billion (Canadian) in assets at Dec. 31)

You might say that the plans missed out – many U.S. airlines have doubled or tripled over the past three years, as mergers reduced capacity and supported revenue and profits. And you might say the plans had poor timing – since March 31, the shares of the major U.S. airlines have lost anywhere from 5 per cent to more than 20 per cent on fears that this golden era for airlines is about to pass, as it has in the past when the carriers begin to compete by adding routes and cutting prices, thereby crushing their own profitability.

"There's always been volatility in the airline names, but a lot of investors think the stocks have become more investable because the U.S. airlines are doing their best to maintain some form of capacity discipline," analyst Helane Becker of Cowen & Co says.

Oil prices fell in the fourth quarter, helping the stocks, but airlines reduced ticket prices in the first and second quarters, and the share prices dropped. Not surprising, Ms. Becker says, but it's indicative of investors' fears of a new era of price competition. Now, she adds, it's time for the airlines to prove they can avoid that temptation and grow profits.

For those who believe, the recent pullback presents opportunity: The U.S. airlines are trading at a steep discount to the broader market. The U.S. investing newspaper Barron's noticed, putting the industry on its most recent cover with the headline "Climb aboard now!" And, of course, Barron's audience is an American one, so the paper left out a reason that Canadians might also look to the carriers: If persistent low oil prices damage Canada's economy, one of the hedges for Canadian investors is industries that win with low oil – such as airlines.

If it all still seems too risky for your personal portfolio, however, the folks running our pension plans have you covered. One day, the airlines' gains will show up in your retirement cheque.

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Note to readers: An earlier version of this article incorrectly said the Canada Pension Plan Investment Board had $3.5-billion (U.S.) in U.S. airline stocks in its portfolio as of March 31. The writer transposed figures in a securities filing; the CPPIB had 3.5 million shares worth $173-million (U.S.), or $125-million (Canadian) when derivatives and other hedges are included.

Selected North American airline stocks

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