DAL vs. AAL: Which Airline Stock Looks More Promising Now?

Delta Air Lines DAL and American Airlines AAL  are two well-known names in the Zacks Transportation- Airline industry. Delta, based in Atlanta, GA, is a founding member of the SkyTeam global airline alliance. DAL is known for its extensive domestic and international network. Delta and its alliance partners collectively serve over 120 countries and territories with more than 800 destinations served globally.

American Airlines, based in Fort Worth, TX, is a founding member of the oneworld global alliance. AAL is known for its extensive domestic and international network. The carrier serves over 350 destinations globally, with more than 226 million passengers having boarded its flights in 2024.

Given this backdrop, let us examine closely to find out which airline heavyweight currently holds the edge, and more importantly, which might be the smarter investment now.

The Case for DAL

Strong international travel demand and diversified revenue streams being resilient are driving Delta Air Lines’ top-line growth. Driven by its diversified revenue base, Delta reported better-than-expected earnings per share and revenues in the third quarter of 2025, results of which were released last month.

The earnings beat by Delta in the September quarter enabled it to maintain its excellent earnings surprise record. Delta has outpaced the Zacks Consensus Estimate in each of the past four quarters. The average beat is in excess of 8%.

Delta Air Lines Price and EPS Surprise

Delta Air Lines price-eps-surprise | Delta Air Lines Quote

With air-travel demand stabilizing, revenues on an adjusted basis are expected to increase in the 2-4% band from the fourth quarter of 2024. DAL also issued impressive guidance for full-year 2025. The company expects full-year earnings to be $6 per share. The current guidance is at the upper half of the previously guided range of $5.25-$6.25 per share. 

However, after the third-quarter earnings release last month, operations were hit by multiple flight cancellations during the 43-day government shutdown. We remind investors that while the shutdown was in progress, the Federal Aviation Administration had announced to reduce flight capacity at 40 major U.S. airports. 

The shutdown has thankfully ended and Delta’s flights are now operating normally. This is a welcome sign for airlines, including DAL, as the holiday season is a very busy time for airlines, with passenger traffic swelling during that period.

Delta’s shareholder-friendly approach also stands out. Highlighting its shareholder-friendly stance, DAL’s management announced a 25% hike in the quarterly dividend payout this year. This was the second dividend increase announced by Delta since its resumption of quarterly dividend payments following the COVID-induced hiatus. The southward movement of oil prices bodes well for the bottom-line growth of Delta. This is because fuel expenses are a significant input cost for airlines. However, high labor costs continue to dampen bottom-line growth.

The Case for AAL

While releasing its third-quarter 2025 results last month, AAL’s management projected earnings per share to be between 45 cents and 45 cents in the fourth quarter of 2025, as capacity cuts are resulting in pricing gains. Driven by improved air travel demand, total revenues in the fourth quarter are likely to increase in the 3-5% range from year-ago levels. For the full-year 2025, AAL expects adjusted earnings per share to be between 65 cents and 95 cents. 

AAL incurred a narrower-than-expected loss in the September quarter, which meant that the company maintained its earnings surprise record, having surpassed estimates in each of the last four quarters. The average beat is in excess of 26%.

American Airlines Price and EPS Surprise

American Airlines price-eps-surprise | American Airlines Quote

AAL’s financial metrics indicate that its leverage is elevated and is a massive negative for shareholders. The debt burden of the company was $10.6 billion at the end of the third quarter of 2025, translating into a debt-to-capitalization in excess of 100%, which is well above Delta’s.

Increased labor costs, a result of the deal inked with pilots last year, are hurting American Airlines’ bottom line. Moreover, since trade unionism is quite robust in this industry, it is hard to keep a check on wage increases. Salaries, wages and benefits have increased 9.9% in 2024, and as a result, AAL expects fourth-quarter 2025 cost per available seat miles (adjusted) to increase in the 2.5-4.5% range from fourth-quarter 2024 actuals.

On a brighter note, the southward movement of oil prices bodes well for AAL’s bottom-line growth.

DAL’s Better Price Performance

Shares of DAL have gained in double digits over the past six months, outperforming its industry and American Airlines.

6-Month Price Comparison

Conclusion

Agreed that the improved air-travel demand scenario and the end of the government shutdown before the holiday season are a big positive for both DAL and AAL. Low fuel costs also represent a tailwind for both carriers.

However, AAL, unlike DAL, does not reward its shareholders with dividends. Dividend-paying stocks are highly sought after, especially in uncertain times like the current scenario. In such a scenario, dividends are a major source of consistent income for investors, though they do not offer dramatic price appreciation. Stocks backed by regular dividends can reduce the volatility of a portfolio. DAL’s better price performance also works in its favor.

Moreover, AAL, unlike DAL, is highly leveraged. Given these factors, DAL seems a better pick than AAL now, even though both stocks carry a Zacks Rank #3 (Hold) at present.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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

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