US Airlines "Are Airline Earnings Set to Significantly Expand Next Year?..."

Research evidence excerpt

US Airlines "Are Airline Earnings Set to Significantly Expand Next Year?..."

Global Research

26 May 2026ab

US Airlines Equities

AmericasAre Airline Earnings Set to Significantly Expand

Next Year? Airlines

Atul Maheswari

Analyst

atul.maheswari@ubs.com

We see likelihood of ~50% earnings growth for several airlines for 2027 +1-212-713 4103

We believe any potential conflict resolution in the Middle East can act as a meaningful Thomas Wadewitz

catalyst for airline stocks. UAL is our top pick in the space followed by DAL, ALK, AAL, Analyst

and LUV. JETS has declined -3.5% YTD vs. S&P 500 at around +10%. This has created a thomas.wadewitz@ubs.com

solid opportunity, in our view. Our updated estimates imply around 50% EPS growth for +1-212-713 6116

2027 for several airlines. We see potential for airline stocks to move higher from here as

market begins pricing in the possibility of significant earnings expansion for 2027.

We update our estimates to incorporate a) lower fuel prices based on the latest

curve. b) slightly higher 2027 RASMs on our expectation that RASMs can grow

LSD% in '27 even as airlines lap the price increases from '26.

For 2026, our estimates imply fuel recapture steadily rising from 2Q to 4Q with

DAL at nearly 100% recapture by 4Q. UAL, AAL, and JBLU are around 80%+

recapture by 4Q per our updated forecasts. ALK is lower at ~70%. Details in

figures 3-5. Further, for 2027, our updated estimates imply around 50% EPS

growth on average across the group (ex ALK/AAL/JBLU due to low 2026 EPS).

Commentary from airlines suggests demand has remained strong with limited

evidence of consumer elasticity to higher fares.

Our what's priced in analysis shows market is pricing in just around $11 in

2027 EPS for UAL (vs. UBSe of $16.48). This implies our 2027 estimates are