Airline Stocks Shine: Analysts Favor UAL, DAL, ALK

As the global economy recovers, demand for air travel is rebounding, boosting investor confidence. Growth in high-margin business travel and the upcoming holiday season are driving an increase in bookings.

Over the past decades, the airline industry has benefited from consolidation, with fewer participants enhancing pricing power and market share on profitable routes. The 2010s saw Delta, United, JetBlue, and Southwest more than double in size from 2012 to 2014.

Spirit Airlines, a major disruptor over the past decade, is considering debt restructuring, which could solidify pricing power for larger carriers.

Some analysts see consolidation resurging. Conor Cunningham of Melius Research suggests these stocks could double again, calling this the best industry setup for U.S. airlines in a decade. He also predicts Trump's pro-business policies could boost corporate travel by 2025, with consumer tax cuts driving international and premium travel growth.

Barclays analyst Brandon Oglenski raised price targets for several airlines. United's target rose from $75 to $150, Delta's from $60 to $90, and Alaska's from $55 to $80, maintaining an Overweight rating for all three. Barclays sees airline fundamentals "turning sharply positive" in 2025 and likely to drive a "much more favorable market perception for the group," potentially affording meaningful share price appreciation for the industry leaders Delta, United and Alaska.

Barclays upgraded American Airlines from Underweight to Equal Weight, raising its target price from $10 to $16. Barclays expects American to regain market share by reversing previous unfavorable commercial changes, leveraging a new co-brand card agreement, and achieving cost efficiencies post-labor contract settlements.

Bank of America has increased price targets for Alaska Air from $55 to $60, United from $84 to $100, and Delta from $60 to $72. BofA analyst Andrew Didora finds airline stocks' fundamentals encouraging, citing slowing domestic capacity growth and positive election outcomes for fundamentals and earnings.

Source: Barron's, The Fly