Are Airline Stocks Ready for Takeoff After a Turbulent 2025?

Industry Overview - Many investors are cautious about airline stocks due to their volatility, influenced by broader economic conditions, leading to an unclear outlook for 2025 [1] - The decline in jet fuel prices, typically a positive indicator, is attributed to lower demand, signaling a potential end to the travel boom that began in late 2021, especially among lower-income consumers [2] Company Insights Delta Air Lines - Delta Air Lines is a focal point for investors, showing resilience with "better-than-feared" earnings supported by strong corporate bookings and high-yield leisure travel [4] - Despite a 5.9% decline in stock price in 2025, Delta has received bullish upgrades, with a current price of $57.32 and a 12-month price forecast of $67.84, indicating an 18.35% upside [5][6] - The stock is trading about 20% below its consensus price target and is attractively valued at around 7x forward earnings, below historical and sector averages [6] Southwest Airlines - Southwest Airlines is trading at $32.56 with a 12-month price forecast of $33.38, suggesting a 2.50% upside, but has a high forward P/E ratio over 20, indicating it is not a value stock [8] - The company is well-positioned for domestic growth if lower interest rates stimulate demand, although it lacks an international presence [9] American Airlines Group - American Airlines Group is currently the worst performer among its peers, down over 34% for the year, primarily due to a significant debt burden of $37 billion [10] - The stock is trading over 45% below its consensus price target, raising questions about its potential for recovery, which may hinge on lower interest rates boosting domestic travel demand [11] - The company has a young fleet, which helps manage capital expenditures and supports efforts to deleverage and generate free cash flow [12]