Zacks Industry Outlook Features Southwest, Copa, and Allegiant Travel

Press Release

Chicago, IL – March 10, 2026 – Zacks Equity Research has released an analysis focusing on Southwest Airlines (LUV), Copa Holdings (CPA), and Allegiant Travel Co. (ALGT).

Industry: Airlines

Airline Sector Faces Challenges Amid Geopolitical Tensions

The U.S.-Iran conflict has significantly impacted the airline industry, especially following joint U.S.-Israel strikes on Iran. These events have led to widespread flight cancellations and the closure of key air routes, forcing airlines to take longer, more fuel-consuming paths. As a result, operational costs have surged, exacerbated by rising oil prices and increasing labor expenses, both of which are weighing on airline profitability.

Despite these obstacles, several airlines have demonstrated adaptability and strength, particularly those prioritizing growth initiatives and operational improvements. Southwest Airlines, Copa Holdings, and Allegiant Travel Co. are among the companies expected to weather these difficulties effectively.

Industry Overview

Companies in the Zacks Airline industry are responsible for transporting passengers and cargo worldwide, operating both mainline and regional aircraft. Many airlines also rely on regional subsidiaries or third-party partners, and their cargo divisions provide a variety of freight and mail services.

Significant investments in technology upgrades are common, and the sector includes both traditional and low-cost carriers. The industry's performance is closely tied to the broader economy. While the pandemic severely impacted passenger revenue, demand for air travel has since rebounded, and a focus on cargo operations has provided additional support.

Key Factors Influencing the Industry

• Rising Fuel Prices: Ongoing Middle East conflicts have caused oil prices to spike, which directly increases airlines' fuel expenses—a major cost component. With most U.S. airlines no longer hedging fuel, they are more vulnerable to these price surges, which could negatively affect earnings if the situation persists.
• Labor Cost Increases: Labor expenses continue to climb, with Southwest Airlines reporting a 6% year-over-year rise in salaries and related costs in 2025. Labor shortages have strengthened unions' bargaining power, resulting in new pay agreements and further cost pressures.
• Emphasis on Cost Reduction: Although inflation is showing signs of easing, it remains high. Airlines are implementing cost-saving strategies and seeking greater efficiency to counteract weaker demand. These efforts have helped companies like Allegiant Travel Co. deliver better-than-expected results in late 2025.
• Shareholder Returns: As economic activity recovers, many airlines are using increased cash flow to reward shareholders through dividends and buybacks. For example, Copa Holdings recently raised its quarterly dividend by 6.2%, reflecting its commitment to shareholder value.

Industry Outlook: Positive Signals from Zacks Rankings

The Zacks Airline industry, which includes 24 companies within the broader Transportation sector, currently holds a Zacks Industry Rank of #28, placing it among the top 12% of all Zacks-ranked industries. This ranking, based on the average Zacks Rank of member stocks, suggests strong near-term prospects. Historically, industries in the top half of Zacks rankings outperform those in the bottom half by more than two to one.

This favorable ranking is driven by a positive earnings outlook across the industry. Before highlighting specific stock recommendations, let's review recent performance and valuation metrics.

Performance and Valuation

In the past year, the Zacks Transportation - Airline industry has risen by 15.7%, compared to a 23.2% gain for the S&P 500 and a 12.7% increase for the broader transportation sector.

Airline stocks are often valued using the price-to-sales (P/S) ratio. The industry's forward 12-month P/S currently stands at 0.5, well below the S&P 500's 5.01 and the sector's 1.45. Over the last five years, the industry's P/S ratio has ranged from a high of 1.12 to a low of 0.29, with a median of 0.46.

Top 3 Airline Stocks to Consider

• Southwest Airlines: Known for its efficient cost structure and expanding network, Southwest continues to form strategic partnerships and reward shareholders. Although the airline has scaled back its fuel hedging, it still maintains some contracts, which has helped cushion the impact of rising fuel prices compared to other U.S. carriers. Southwest has exceeded earnings expectations in three of the last four quarters, with an average surprise of 253.9%, and currently holds a Zacks Rank #1 (Strong Buy).
• Allegiant Travel: Allegiant's unique business approach and low-cost model generate diverse revenue streams from leisure flights and various travel services. The company is also upgrading its fleet, aiming for 123 aircraft by the end of Q1 2026. Allegiant has beaten earnings estimates in three of the last four quarters, with an average surprise of 23.6%, and is rated Zacks Rank #1.
• Copa Holdings: Based in Panama City, Copa benefits from robust domestic travel demand, regional economic growth, and innovative strategies. The airline has surpassed earnings estimates in each of the past four quarters, with an average surprise of 5.7%. Earnings forecasts for this year and next have been revised upward by 4.9% and 1.4%, respectively, over the past two months. Copa currently holds a Zacks Rank #2 (Buy).

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• Southwest Airlines Co. (LUV): Free Stock Analysis Report
• Copa Holdings, S.A. (CPA): Free Stock Analysis Report
• Allegiant Travel Company (ALGT): Free Stock Analysis Report