3 Airline Stocks in Focus as Industry Prospects Brighten

Despite the ongoing tariff-related woes, prospects of the Zacks Transportation - Airline industry have taken a turn for the better with air-travel demand stabilizing. The decline in fuel costs also represents a positive for the industry players, as fuel expenses represent a key input cost for airlines. The shareholder-friendly approach of airlines also bodes well.

As a result, we believe that investors interested in the industry would do well to monitor stocks like Delta Air Lines DAL, Ryanair Holdings RYAAY and SkyWest SKYW for higher returns.

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. Their 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 corners, with passenger revenues taking a beating. However, air travel demand has improved from the pandemic lows. This is a huge positive for airlines.

Factors Relevant to the Industry's Fortunes

Air Travel Demand Scenario Improves: The stabilization and improvement of air travel demand is a positive for airlines. Highlighting the improvement, Delta, while presenting at the Morgan Stanley Laguna Conference, gave an improved view of revenues for the third quarter of 2025. The airline now expects revenue growth in the 2-4% band in the September quarter from third-quarter 2024 actuals, which is in the upper half of the guidance range provided while releasing its second-quarter 2025 results. At that time, DAL had projected third-quarter revenues on an adjusted basis to either remain flat or increase up to 4% from the third quarter of 2024 level. Factors like stronger-than-expected demand and capacity discipline across the U.S. airline industry are responsible for the improved September quarter outlook.

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, DAL’s board of directors approved a dividend hike of 25%, thereby raising its quarterly cash dividend to 18.75 per share (75 cents annualized) from 15 cents (60 cents annualized). The raised dividend will be paid on Aug. 21, 2025, to Delta’s stockholders of record at the close of business on July 31, 2025.

The move reflects Delta’s intention to utilize free cash to enhance its shareholders’ returns. This was the second successive year in which Delta increased its quarterly dividend payout after a COVID-19-induced hiatus.

Low Fuel Costs: The southward movement of oil prices bodes well for the bottom-line growth of industry participants. This is because fuel expenses are a significant input cost for airlines. Per IATA, the average jet fuel cost is expected to be $86 per barrel in 2025, down from $99 per barrel in 2024. The total fuel bill in 2025 is expected to be $236 billion, down from the $261 billion recorded in 2024. 

Crude oil has been struggling in 2025, with prices sliding to multi-month lows. Tariff concerns, weakening consumer confidence and production increase by OPEC+ have all contributed to this downward pressure. Oil price declined 6% in the April-June period.

Uptick in Labor Costs: The increase in expenses on the labor front represents a challenge for airlines. With U.S. airlines grappling with labor shortages in the post-COVID-19 high-demand scenario, 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.  

Zacks Industry Rank Signals Bright Prospects

The Zacks Airline industry is a 25-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #55, which places it in the top 22% of 245 Zacks industries.

The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright 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 top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Before we present a few stocks that you may want to add/retain in your portfolio, let’s look at the industry’s recent stock-market performance and its valuation picture. 

Industry Surpasses Sector and S&P500

Over the past year, the Zacks Transportation - Airline industry has gained 41.9% against the S&P 500 composite’s rise of 18.8%. The broader sector has declined 10.9% in the said 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 0.67X compared with the S&P 500’s 5.37X. It is also below the sector’s forward-12-month P/S of 1.46X.

Over the past five years, the industry has traded as high as 1.06X, as low as 0.33X and at a median of 0.49X.

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

3 Airline Stocks to Monitor Now

Ryanair currently sports a Zacks Rank #1 (Strong Buy). RYAAY, based in Ireland, is benefiting from upbeat air travel demand.

  You can see the complete list of today’s Zacks #1 Rank stocks here. 

RYAAY has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark on the other occasion), delivering an average surprise of 61.2%. The Zacks Consensus Estimate for current and next-year earnings has been revised 4.9% and 6.5% upward over the past 60 days, respectively.

 Price and Consensus: RYAAY

 

SkyWest is based in St. George, UT, and operates as a regional airline in the United States through its subsidiary SkyWest Airlines. It offers high-quality regional service to airports located primarily in the Midwestern and Western United States, as well as Mexico and Canada.

Low fuel costs are aiding the bottom line. The stock has gained 10% over the past three months. Over the past 60 days, the Zacks Consensus Estimate for 2025 earnings has been revised 6.3% upward. SkyWest currently flaunts a Zacks Rank #1.

Price and Consensus: SKYW

Delta is based in Atlanta, GA. The carrier is being well-served by the upbeat air travel demand scenario and low fuel costs. Efforts to reward its shareholders also bode well. DAL’s liquidity position is also good.

Delta’s earnings surpassed estimates in three of the last four quarters and missed the mark once. The average beat was 4.8%. The stock has gained 21% over the past three months. Delta currently carries a Zacks Rank #3 (Hold).

Price and Consensus: DAL

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Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
 
Ryanair Holdings PLC (RYAAY): Free Stock Analysis Report
 
SkyWest, Inc. (SKYW): Free Stock Analysis Report

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

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