Zacks Investment Ideas section spotlights Consolidated Airlines, American, Delta, and United

Press Release

Chicago, IL – March 11, 2026 – Zacks Investment Ideas spotlights several notable airline stocks, including Allegiant Travel Co. (ALGT), Southwest Airlines (LUV), International Consolidated Airlines Group (ICAGY), American Airlines (AAL), Delta Air Lines (DAL), and United Airlines (UAL).

Are Airline Stocks Ready for a Comeback?

Following a broad correction in the sector, airline stocks are now trading at appealingly low forward price-to-earnings ratios, making their recovery potential more enticing to investors.

Despite this, several leading U.S. carriers have revised their earnings outlooks downward, citing higher fuel expenses, global tensions, and inconsistent travel demand.

These headwinds have weighed on the industry’s performance and led to increased investor caution. Nevertheless, a handful of airline stocks are beginning to look undervalued.

Key Reasons Behind Lowered Airline Earnings Guidance

1. Significant Increase in Jet Fuel Costs

Fuel remains a major cost for airlines, and recent unrest in the Middle East has sent oil prices soaring. Although crude oil recently retreated to around $80 per barrel after exceeding $100, jet fuel prices have still jumped over 70% in Asia and more than 140% in Europe, largely due to the closure of the Strait of Hormuz and ongoing supply chain risks.

These elevated fuel costs are squeezing profit margins and prompting airlines to adjust their earnings projections downward.

2. Geopolitical Instability Affecting Flight Operations

Widespread airspace restrictions in the Middle East, triggered by Iran-related incidents, have led to thousands of grounded flights and disrupted global travel patterns.

Such disruptions mean longer flight paths, more cancellations, and ultimately higher operating costs and reduced revenues for airlines.

3. Softer Demand and Pricing Trends

In addition to rising costs, U.S. airline stocks have lagged the broader market this year, as both demand and ticket prices have fallen short of expectations.

Ongoing economic uncertainty has also contributed to weaker consumer spending on travel.

4. Labor Challenges and Pilot Shortages

Airlines continue to grapple with high labor expenses and a shortage of pilots, both of which put pressure on profit margins and complicate scheduling.

Additionally, a recent shortage of TSA staff has resulted in lengthy security lines at major airports across the country, including Houston, New Orleans, and Atlanta. This staffing issue is linked to a partial Department of Homeland Security shutdown, which has forced TSA employees to work without pay, leading to increased absenteeism and reduced staffing levels.

Southwest Airlines: A Standout Among Oversold Airline Stocks

Three airlines—Allegiant Travel Co., Southwest Airlines, and International Consolidated Airlines Group—currently hold the top Zacks Rank #1 (Strong Buy) and appear to be oversold.

All three are trading at less than 10 times forward earnings and have experienced sharp declines over the past month. However, they are showing stable or improving earnings-per-share (EPS) revisions despite industry-wide cost pressures.

Southwest, as a leading U.S. regional carrier, is less exposed to international disruptions. The company trades at 9 times forward earnings, and its EPS estimates for fiscal years 2026 and 2027 have increased by 6% and 4%, respectively, over the past month.

Southwest is projected to generate over $30 billion in annual revenue, with earnings per share expected to surge to $4.38 this year, up from $0.93 in 2025. Looking ahead, FY27 EPS is forecasted to climb another 18% to $5.17.

Notably, compared to last year’s estimates, Southwest’s projected EPS for FY26 and FY27 has jumped by 57% and 33%, respectively.

Strategic Insights and Takeaways

For investors willing to be patient and accept some risk, airline stocks could soon offer compelling opportunities to buy on weakness. While the sector is highly cyclical and sensitive to economic changes, it can deliver strong returns when conditions improve.

Major carriers such as American, Delta, and United have all reduced their earnings forecasts but remain attractive for long-term investors, each holding a Zacks Rank #3 (Hold).

Although further declines are possible, several indicators suggest that the recent pullback in airline stocks may be creating attractive entry points, especially as travel demand remains robust heading into 2026 and valuations are at a discount. This environment could benefit investors seeking to capitalize on a cyclical rebound.

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• Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
• United Airlines Holdings Inc (UAL): Free Stock Analysis Report
• Southwest Airlines Co. (LUV): Free Stock Analysis Report
• American Airlines Group Inc. (AAL): Free Stock Analysis Report
• Allegiant Travel Company (ALGT): Free Stock Analysis Report
• International Consolidated Airlines Group SA (ICAGY): Free Stock Analysis Report

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