3 Airline Stocks to Monitor as the Industry Grapples With Challenges

About the Industry

The Zacks Airline industry players are engaged in transporting passengers and cargo to various destinations globally. Most operators maintain a fleet of multiple mainline jets in addition to several regional planes. The companies' operations are aided by their regional airline subsidiaries and third-party regional carriers. Additionally, industry players utilize their respective cargo divisions to offer a wide range of freight and mail services. The players invest substantially to upgrade technology. The industry, apart from comprising legacy carriers, includes low-cost players. The well-being of companies in this group is linked to the health of the overall economy. For example, the aviation space was one of the worst pandemic-hit sectors, with passenger revenues taking a beating. However, air travel demand has improved from the pandemic lows.

Factors Relevant to the Industry's Fortunes

Surge in Fuel Costs: A Bane: The ongoing uncertainty in the Middle East has resulted in a sharp jump in oil prices. This upward movement in oil prices is naturally hurting the bottom line of airlines. This is because fuel expenses represent a key input cost for airlines. Currently, oil prices are hovering around $85 a barrel. With most U.S. carriers having abandoned fuel hedging strategies, such oil supply disruption has left them fully exposed to price spikes. This development may hurt the second-quarter earnings of airlines, particularly in the event of the conflict persisting.

Uptick in Labor Costs: The increase in expenses on the labor front represents another challenge for airlines. For example, at American Airlines, salaries and related costs have increased 8.2% year over year in the first half of 2026. With U.S. airlines grappling with labor shortages, the bargaining power of various labor groups has naturally increased. As a result, we have seen pay-hike deals being inked in the space. This is resulting in a spike in labor costs, limiting bottom-line growth in turn.  

Upbeat Summer Travel: A Positive: Despite headwinds like high inflation, elevated fuel and labor costs, air-travel demand, particularly on the leisure front, remains healthy as exemplified by the upbeat Memorial Day weekend air travel scenario.  In fact, passenger volumes, despite high air fares, are expected to remain strong during the entire summer season. For example, American Airlines expects record travel during the summer season (May 21-Sept. 8). During the period, the airline expects to fly 75 million passengers across 750,000 flights, smashing its previous record established in 2019. 

Strong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more and more companies are allocating their increasing cash pile by way of dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and business confidence.

Among airlines, Delta’s board of directors approved a dividend hike of 15%, thereby raising its quarterly cash dividend to 21.5 cents per share (86 cents annualized) from 18.75 cents (75 cents annualized). The move underscores DAL's strong financial position and robust cash-flow generation, highlighting its commitment to delivering value to shareholders.  

Zacks Industry Rank Signals Dull Prospects

The Zacks Airline industry is a 29-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #163, which places it in the bottom 34% of 247 industries.

The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates murky near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate.

Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. The industry's earnings estimate for 2026 has decreased 34.1% on a year -over-year basis.

Before we present a few stocks from the industry that you may want to hold on to, let’s take a look at the industry’s recent stock market performance and the valuation picture.

Industry Lags the Sector and the S&P500

Over the past year, the Zacks Transportation - Airline industry has gained 4.8% compared with the S&P 500 composite’s rise of 23.5%. The broader sector has gained 22.3% in the same time frame.

One-Year Price Performance

Valuation Picture

The price/sales (P/S) ratio is often used to value airline stocks. The industry currently has a forward 12-month P/S of 0.52X compared with the S&P 500’s 4.97X. It is also below the sector’s forward-12-month P/S of 1.52X.

Over the past five years, the industry has traded as high as 0.75X, as low as 0.29X and at the median of 0.46X.

Forward 12-Month Price-to-Sales Ratio (Past Five Years)

3 Airline Stocks to Monitor Now

Delta Air Lines continues to stand out for resilient travel demand, disciplined capacity and a revenue mix anchored in premium, loyalty and corporate. The first-half of 2026 showed impressive adjusted revenues with broad-based strength across corporate and leisure, supported by premium growth, higher card spend and expanding third-party MRO activity.

High labor and fuel costs are worrisome. The carrier’s earnings have surpassed the Zacks Consensus Estimate in each of the past four quarters. The average beat is 5.5%. Delta currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

 Price and Consensus: DAL

American Airlines is based in Fort Worth, TX. Strong air travel demand, particularly on the leisure front, despite high fuel costs, is aiding AAL. Efforts to broaden its network are also praiseworthy.

The company’s high debt levels are worrisome. The carrier’s earnings have surpassed the Zacks Consensus Estimate in three of the past four quarters (missing the mark in the other quarter). The average beat is 97.6%. American Airlines currently carries a Zacks Rank #3.

 Price and Consensus: AAL

Copa Holdings, based in Panama City, Panama, currently carries a Zacks Rank #3. The airline is benefiting from strong domestic air travel demand owing to factors like regional economic expansion, its ability to adapt to market trends and focus on innovative strategies.

Despite the tough conditions, Copa Holdings demonstrated resilience and beat the Zacks Consensus Estimate for earnings in two of the past four quarters (missing the mark on the other occasions). The average beat is 0.9%. The Zacks Consensus Estimate for current and next-year earnings has been revised 0.6% and 1.2% upward over the past 60 days, respectively.

Price and Consensus: CPA

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This article originally published on Zacks Investment Research (zacks.com).

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