US Airlines: 2Q26 Preview: Group Higher Before Lower; Upgrading ALGT to Buy/HR

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US Airlines: 2Q26 Preview: Group Higher Before Lower; Upgrading ALGT to Buy/HR

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26 Jun 2026 05:08:12 ET │ 35 pages

US Airlines

2Q26 Preview: Group Higher Before Lower; Upgrading ALGT to Buy/HR

CITI'S TAKE

John Godyn AC

We're updating EPS estimates, price targets and views as part of our process +1-212-816-8014

of previewing EPS season and have published a slide-deck summarizing our john.godyn@citi.com

thoughts. Across airlines, we see upside vs. consensus in 2Q and even more

upside in 3Q before our estimates normalize with respect to consensus on Max Lesnik

re-accelerating ASM growth in 4Q26. Accordingly, we expect nearly every +1-212-816-2382

airline to beat and offer 3Q guidance which exceeds current consensus max.lesnik@citi.com

estimates. However, sell-side consensus seems stale, in our view, and the

recent rally in stocks has already priced in much of the upside related to this

view. As such, we believe the stocks that will outperform are those that can

sustain recently re-rated multiples vs. peers – namely the supermajors

(DAL/UAL/AAL). In addition, we update our ALGT model for the SNCY

merger and see significant, stock-specific upside to 2027 EPS. As such, we

upgrade ALGT to Buy/High Risk.

2Q26 Preview: Higher Before Lower as Early Reporters Likely Outperform Late-

Reporters. As long as capacity growth remains modest, fare increases are likely to

be sustained. Therefore, because capacity trends are largely ‘locked in’ for 3Q at

levels which are in fact modest, airlines are likely to hold onto more profits than

consensus expects, even as fuel prices fall. Simply put – 3Q EPS guidance is likely to

beat across the board. But – not all airlines will sustain recent, higher valuation

multiples on those positive earnings revisions.