Higher Airfares Are Sticking After Spring Price Hikes, Analyst Says

Bank of America Securities (BofA) analyst Andrew G. Didora has adopted a more positive outlook on U.S. airlines ahead of second-quarter earnings, citing strong demand, stable fares, and lower fuel prices as key sector supports.

BofA noted that spring fare increases have mostly persisted, and stable summer capacity is expected to support unit revenue through the third quarter.

The firm raised estimates and price forecasts across its airline coverage, but warned that faster fourth-quarter capacity growth could moderate unit revenue gains later in 2026.

Buy-Rated Network Carriers: Delta, United, Alaska

Delta: Pricing Power Supports Buy Rating

BofA stated that Delta should benefit from premium and corporate exposure, strong margins, and solid free cash flow. Third-quarter unit revenue is expected to accelerate as bookings reflect higher fares.

United’s Margin Expansion Path Stands Out

BofA noted that United benefits from a strong industry position, healthy margins, and opportunities for further margin expansion. Third-quarter unit revenue and costs are expected to rise due to strong demand and fare increases.

Alaska: Valuation Offsets Hawaii Pressure

Despite near-term fuel pressure, BofA raised its 2026 EPS forecast to $1.04, citing Alaska’s premium exposure, international growth, and valuation as support for the Buy rating.

Neutral Ratings: American, Allegiant

American: Leverage Keeps Rating Neutral

BofA noted that American faces higher earnings volatility due to leverage. While improving demand and pricing are positive, lower margins, higher leverage, and weaker free cash flow keep it behind other network airlines.

Allegiant: Demand Strength Meets Deal Risk

BofA stated that stronger demand and lower fuel costs support Allegiant’s outlook, but the risk associated with Sun Country integration limits potential upside.

Underperform Ratings: Southwest, JetBlue, Frontier

Southwest: Execution Risk Weighs

BofA noted that Southwest should benefit from healthy demand and firm pricing, but its business transformation introduces execution risk as initiatives reach their third-quarter run rate.

JetBlue: Leverage Keeps BofA Cautious

BofA stated that JetBlue should benefit from Spirit’s exit and healthy demand, but rising second-half capacity, weak earnings, and high leverage keep the firm cautious.

Frontier: Margin Profile Limits Upside

BofA noted that lower fuel costs and utilization-driven capacity growth should benefit Frontier, but its weaker margin profile keeps the firm cautious.

Price Action: At the time of publication Wednesday, DAL shares were trading higher by 0.41% at $94.04, UAL by 0.22% at $136.01, AAL by 1.36% at $18.32, ALGT by 3.29% at $121.47, JBLU by 1.40% at $5.81 and ULCC by 0.06% at $7.92, while ALK slipped 0.48% to $52.18 and LUV fell 1.22% to $50.79.

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