Why this airline's stock is expected to be a world leader through 2026
By Philip van Doorn
One carrier is expected to lead all others by a wide margin for core profitability
Airports are jammed and jet airliners are stuffed. It sure seems to be a good time to run an airline. But investors still don't trust this industry.
For investors interested in a cheap group of stocks that may be in the midst of a long-term upswing, a screen of performance estimates through 2026 shows one airline expected to stand far above the others by an important industry metric.
There are only three airlines in the S&P 500 SPX - Delta Air Lines Inc. (DAL), United Airlines Holdings Inc. (UAL) and Southwest Airlines Co. (LUV). So let's take a look at valuations and growth estimates for the S&P Composite 1500 Passenger Airlines industry group, as well as those for that full index and for the S&P 500.
Industry group or index Current forward P/E 10-year average forward P/E Current valuation to 10-year average Estimated two-year revenue CAGR through 2026 Estimated two-year EPS CAGR through 2026
S&P Composite 1500 Passenger Airlines 8.4 11.7 72% 5.7% 26.6%
S&P Composite 1500 20.9 18.0 116% 5.1% 13.8%
S&P 500 21.5 18.3 117% 5.7% 13.8%
Source: FactSet
The S&P 1500 Composite Index XX:SP1500 is made up of the S&P 500, the S&P MidCap 400 MID and the S&P Small Cap 600 SML.
The S&P 1500 Composite airline industry group (made up of nine companies) trades at a forward price-to-earnings ratio of 8.4, based on weighted consensus estimates earnings estimates for the next 12 months, among analysts polled by FactSet. That compares with forward P/E valuations of 20.9 for the S&P 1500 and 21.5 for the S&P 500. And the airlines trade far below their 10-year average P/E, while the broad indexes trade above their averages.
You might have to scroll the table to see the two columns on the right that show a two-year expected two-year compound annual growth rate (CAGR) for the airlines through 2026 that is in line with that of the S&P 500. But the industry group's expected earnings-per-share CAGR is expected to be much higher than those of the broad indexes.
Screening airline stocks
The $1.1 billion U.S. Global Jets ETF JETS holds 51 stocks of airlines, aircraft manufacturers, airport operators and other relates companies. It is designed to track the global passenger air travel industry.
It can help investors to know which airlines are expected to operate their core passenger transportation businesses most efficiently. We can calculate gross profit per available seat kilometer (ASK) by subtracting estimated operating expenses per ASK from estimated total revenue per ASK.
To screen airlines, we started with the 26 held by JETS and narrowed the list to the 20 for which FactSet had consensus estimates in U.S. dollars through calendar 2026 for total revenue and operating expenses per ASK. Here are the 10 expected to show the highest level of gross profit per ASK for 2026:
Company Ticker Country 2024 estimated gross profit per ASK 2025 estimated gross profit per ASK 2026 estimated gross profit per ASK
Delta Air Lines Inc. DAL U.S. $1.53 $1.66 $2.08
Copa Holdings S.A. Class A CPA Panama $1.51 $1.50 $1.50
International Consolidated Airlines Group SA UK:IAG U.K. $1.20 $1.21 $1.26
United Airlines Holdings Inc. UAL U.S. $0.94 $1.03 $1.12
Alaska Air Group Inc. ALK U.S. $0.64 $0.84 $0.95
Air Canada CA:AC Canada $0.36 $0.53 $0.92
Pegasus Hava Tasimaciligi Anonim Sirketi TR:PGSUS.E Turkey $0.92 $0.88 $0.89
Air France-KLM SA FR:AF France $0.66 $0.89 $0.78
American Airlines Group Inc. AAL U.S. $0.60 $0.65 $0.77
Allegiant Travel Co. ALGT U.S. $0.14 $0.57 $0.70
Source: FactSet
There is no question that Delta runs away with this one - at least by analysts' expectations for gross profit per ASK going out two years.
Leaving the list in the same order, here is a summary of the stocks' P/E valuations:
Company Ticker Forward P/E 10-year average P/E Current P/E to 10-year average
Delta Air Lines Inc. DAL 6.9 12.2 57%
Copa Holdings S.A. Class A CPA 5.7 16.6 34%
International Consolidated Airlines Group SA UK:IAG 4.3 10.2 42%
United Airlines Holdings Inc. UAL 5.1 17.3 30%
Alaska Air Group Inc. ALK 8.2 20.7 40%
Air Canada CA:AC 6.2 11.9 52%
Pegasus Hava Tasimaciligi Anonim Sirketi TR:PGSUS.E 7.1 23.0 31%
Air France-KLM SA FR:AF 2.2 7.1 31%
American Airlines Group Inc. AAL 6.4 10.0 64%
Allegiant Travel Co. ALGT 14.4 24.7 58%
Source: FactSet
And here is a summary of ratings and consensus price targets for the group. Prices and targets are in local currencies where the stocks are listed.
Company Ticker Share "buy" ratings Share neutral ratings Share "sell" ratings Oct. 1 price Cons. price target Implied 12-month upside potential Delta Air Lines Inc. DAL 91% 9% 0% 49.96 60.56 21% Copa Holdings S.A. Class A CPA 94% 6% 0% 92.57 147.67 60% International Consolidated Airlines Group SA UK:IAG 78% 22% 0% 1.95 2.41 23% United Airlines Holdings Inc. UAL 91% 5% 4% 56.13 72.08 28% Alaska Air Group Inc. ALK 73% 27% 0% 45.11 53.09 18% Air Canada CA:AC 81% 13% 6% 16.13 23.12 43% Pegasus Hava Tasimaciligi Anonim Sirketi TR:PGSUS.E 50% 50% 0% 232.80 268.07 15% Air France-KLM SA FR:AF 37% 47% 16% 8.41 11.19 33% American Airlines Group Inc. AAL 35% 56% 9% 10.90 11.75 8% Allegiant Travel Co. ALGT 17% 75% 8% 56.41 54.50 -3%
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