3 Airline Stocks in Focus as Industry Prospects Brighten

Industry Overview - The Zacks Transportation - Airline industry is experiencing improved prospects due to stabilizing air-travel demand and declining fuel costs, which are significant input costs for airlines [1][4] - The industry includes both legacy carriers and low-cost airlines, with operations supported by regional subsidiaries and third-party carriers [3] Air Travel Demand - Air travel demand has stabilized, with Delta Air Lines projecting a revenue growth of 2-4% for Q3 2025 compared to Q3 2024, indicating stronger-than-expected demand and capacity discipline [4] Financial Returns - Airlines are increasingly allocating cash for dividends and buybacks, reflecting financial strength and confidence in business recovery post-pandemic [5] - Delta Air Lines approved a 25% increase in its quarterly dividend, raising it to $0.75 annualized, to be paid on August 21, 2025 [6][7] Fuel Costs - The average jet fuel cost is expected to decrease to $86 per barrel in 2025 from $99 per barrel in 2024, contributing to a lower total fuel bill of $236 billion in 2025 compared to $261 billion in 2024 [8] Labor Costs - Airlines are facing increased labor costs due to labor shortages and heightened bargaining power of labor groups, which may limit bottom-line growth [10] Industry Ranking - The Zacks Airline industry holds a Zacks Industry Rank of 55, placing it in the top 22% of 245 Zacks industries, indicating bright near-term prospects [12][13] Stock Performance - Over the past year, the Zacks Transportation - Airline industry has gained 41.9%, outperforming the S&P 500's rise of 18.8% and the broader sector's decline of 10.9% [14] Valuation - The industry has a forward 12-month price-to-sales (P/S) ratio of 0.67X, significantly lower than the S&P 500's 5.37X and the sector's 1.46X [16] Stocks to Monitor - Delta Air Lines (DAL), Ryanair Holdings (RYAAY), and SkyWest (SKYW) are highlighted as stocks to monitor for potential higher returns, with RYAAY showing a strong earnings surprise history [2][19][20][23][27]