Why This Texas-Based Company Could Be a Key Pick for Airline Investors

In Oliver Stone's 1987 classic Wall Street, Gordon Gekko attempted to extract profit from the fictitious Bluestar Airlines by committing what amounted to insider trading, implying that it's difficult to make money with airline stocks the "right way."

Hollywood hits aside, if Warren Buffett has difficulty making money in airline stocks -- he's taken losses in the industry on two separate occasions -- best believe that this segment isn't giving away "easy money." Of course, it pays to remember that Gekko is a fictional character and even the greatest investors, including Buffett, don't bat a thousand.

Add it all up and it might sound as though the best course of action is to avoid stocks like American Airlines (NASDAQ: AAL), but this Texas-based carrier has recently been gaining altitude and its ascent may be far from over.

American has flown through the darkest clouds

As of Monday, Oct. 27, shares of American are off 23.08% year to date, as of this writing. That's not a data point that screams "please invest here," but understanding the 2025 disappointments delivered by legacy carriers is easy. A lot of the gloominess boils down to trade tariffs.

American Airlines could be jet fuel for investors interested in this industry. Image source: American Airlines Newsroom.

Those levies hammered airline stocks, including American, on multiple fronts. With some of the targets of President Donald Trump's tariff gambit, such as Canada and Mexico, being important sources of arrivals to the U.S., international business and leisure travel to this country has faltered. Not surprisingly, domestic trade policy has drawn rebuke from the airline industry.

The tariffs also raised costs for American and its airline peers. Some countries at which the U.S. has aimed tariffs have retaliated or simply boosted prices of certain goods purchased by domestic companies. That's relevant in discussing American Airlines because two of its aircraft suppliers, Airbus and Embraer, are foreign companies, and even though Boeing jets are assembled in the States, up to half of the components in some of those aircraft are sourced overseas.

Fortunately, we're more than six months removed from "Liberation Day" and American is on the path to redemption. The stock is higher by 18.57% over the past month amid what many investors may perceive as another set of trying circumstances.

What government shutdown?

The current government shutdown could become the longest in U.S. history shjould it continue much longer and it'd be reasonable to think it's a major headwind to airlines. After all, carriers are dependent on the Federal Aviation Administration (FAA) for details such as landings and takeoffs.

Obviously, American's recent stock performance paints a different picture and history confirms a nonworking government isn't always a drag on airline stocks.

Put it this way. The shutdown didn't stop TD Cowen from lifting American's price target to $18 from $13 on Monday, implying upside of almost 34% from that day's closing price.

American is alluring as a long-haul investment

In the airline biz, a lengthy flight is called a "long haul." Investors may want to apply that perspective to American Airlines, but with the caveat that airline investing isn't always a smooth flight. Still, it shouldn't be ignored that management is bullish. CEO Robert Isom believes his company offers more upside than at least two of American's biggest competitors.

The wider industry outlook could also prove supportive of American shares. By some estimates, the total global airline fleet will double in size by 2044 driven by growing middle classes in international markets. That could stoke demand for more international/long-haul travel, the more profitable routes for carriers like American.

The warning label is that airline stocks are highly cyclical, but if American can elevate its profitability and margins, it could deliver a first-class investing experience.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.