Major US airline stocks have soared in recent months as Wall Street grows more bullish on increased revenue from route expansions and growing demand for premium travel.
Delta (DAL) and United (UAL) stocks hit all-time highs as the broader market rose in the days following Donald Trump’s White House victory.
Year to date, Delta and United have gained 60% and 134%, respectively, handily beating the S&P 500’s (^GSPC) gain of more than 25%. American (AAL) has gained roughly 6% during the same period while rallying more than 50% since August.
Even shares of JetBlue (JBLU) and Frontier (ULCC) are positive for the year, despite failed consolidation attempts among the low-cost carrier players.
Airline industry watchers see a strong end-of-the-year finish for Delta, United, and American, despite ongoing industry challenges such as higher maintenance costs, increased pilot wages signed into contracts last year, and new fleet restraints due to production issues at Boeing (BA).
“These challenges are showing Wall Street and the people who are savvy that, ‘Hey, these companies are well managed,’” said Mike Boyd, president of aviation research and consulting company Boyd Group International.
Air travel is expected to reach all-time high levels this Thanksgiving holiday.
Starting Tuesday, the Transportation Security Administration projects it will screen 18.3 million people over the next seven days.
“I think we’re going to have a very strong end of the year for American, United, Delta — even Southwest … they’ve turned the corner,” Boyd said.
More demand for extra legroom, refundable tickets
Part of the reason for the big carriers’ success has to do with increased demand for premium travel, which includes perks like extra legroom, refundable tickets, and early boarding. Analysts expect the higher margins from such offerings to boost earnings, which in turn could lift stocks.
The growing trend of charging more for perks like advanced seating, window seats, and extra legroom and bags has drawn criticism from a US Senate panel led by Democratic Sen. Richard Blumenthal. The lawmaker announced a hearing with airline executives next Wednesday to discuss what he calls “sky-high junk fees” in the legislators’ latest report.
Delta expects premium ticket revenue to exceed main cabin sales by 2027. Delta laid out plans to expand its offering to high-net-worth travelers at its Investment Day last week, with the company expecting 85% of seats added in 2025 to be premium.
“That premium consumer is doing well,” Delta CEO Ed Bastian said last Wednesday, pointing to millennials as the fastest-growing cohort in the travel spend category.
