DAL vs. LUV: Which Airline Stock is a Stronger Play Now?

Core Viewpoint - Delta Air Lines (DAL) and Southwest Airlines (LUV) are both significant players in the U.S. airline industry, facing challenges due to tariff-induced economic uncertainties and operational issues, with DAL currently appearing to be the more favorable investment option [1][10][16]. Summary by Sections Delta Air Lines (DAL) - DAL has withdrawn its full-year 2025 outlook due to economic uncertainties and is reducing costs by trimming capacity [3]. - Despite these challenges, DAL beat the Zacks Consensus Estimate for earnings, marking its second earnings beat in the last four quarters [4]. - Recent positive developments regarding tariffs, including a 90-day deal between the U.S. and China to reduce reciprocal tariffs, are beneficial for DAL, which has a global presence [5]. - The decline in oil prices is expected to positively impact DAL's bottom line, as fuel expenses are a significant cost for airlines [5]. - DAL resumed paying quarterly dividends in 2023, increasing its payout by 50% in June 2024, indicating confidence in its cash flow and prospects [6]. - The airline ended the first quarter of 2025 with cash and cash equivalents of $3.7 billion, exceeding its current debt level of$2.9 billion, and has a times interest earned ratio of 7.7, which is favorable compared to industry levels [7]. Southwest Airlines (LUV) - LUV incurred a loss in the first quarter of 2025 due to high non-fuel costs, with cost per available seat mile (excluding fuel) increasing by 4.6% year over year [10]. - The airline did not reaffirm its earnings guidance for 2025 and 2026, facing operational challenges from activist investor Elliott Investment Management, which has led to disruptions in flight schedules and customer service [11]. - LUV has decided to end its long-standing free baggage policy, marking a significant change in its customer service approach [12]. - The airline's fleet plans are hindered by delivery delays of the Boeing 737 MAX, which are expected to require substantial capital expenditures [13]. - LUV's dividend yield is higher, but the ongoing issues with Elliott and Boeing present unique challenges that may affect its growth prospects [12][16]. Conclusion - Both DAL and LUV are impacted by tariff-induced uncertainties, but DAL's financial stability and recent positive developments position it as a better investment choice compared to LUV, which faces additional operational challenges [15][16].