U.S. airlines are poised for a profitability upswing, with fresh long-term forecasts pointing to accelerating international demand, wider margins, and a sharper divide between legacy carriers gaining strength and low-cost rivals still struggling to regain footing.
JP Morgan analyst Jamie Baker has rolled out new 2027 estimates and set fresh December 2026 price forecasts across the U.S. airline sector. His forecasts anticipate industry revenue climbing about 8% in 2026 and 5.5% in 2027, with growth largely driven by international travel and increased aircraft deliveries.
Baker expects operating margins to expand by 2.3 percentage points in 2026, led by American Airlines (NASDAQ:AAL) and Southwest Airlines (NYSE:LUV), and improve by another 1.6 points in 2027 despite fuel costs remaining a concern.
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The analyst set Street-high forecasts for United Airlines Holdings (NASDAQ:UAL) at $149, Alaska Air Group (NYSE:ALK) at $96, and Sun Country Airlines Holdings (NASDAQ:SNCY) at $23. He reiterated his view that industry profits are concentrated among a few players, while low-cost carriers face persistent challenges returning to profitability.
He added that while contained for now, labor costs remain a larger long-term concern than domestic capacity growth.
Baker also noted that airline stocks often move in seasonal cycles. Buying in September or October and selling in April or May has historically yielded a 28% average return since 2007, outperforming the S&P 500 by 13 points. Excluding pandemic-driven distortions, the strategy's long-term average return rises to 33%.
Alaska Air Group was maintained with an Overweight rating and the price forecast was raised from $73 to $96. Baker said the airline has firmly entered the legacy category after acquiring Hawaiian Airlines. With management forecasting $10 EPS and 11–13% margins by 2027, he sees upside. Risks include weaker leisure demand or loyalty program setbacks.
American Airlines was maintained with an Overweight rating and the price forecast was raised from $17 to $20. Baker no longer views American Airlines as "trapped equity," citing deleveraging and limited capital spending. He set a $20 forecast, highlighting benefits from international recovery. Risks include higher labor costs and slower corporate travel gains.
Delta Air Lines (NYSE:DAL) was maintained with an Overweight rating and the price forecast was raised from $72 to $85. Baker said the airline remains the industry leader, citing strong margins, loyalty economics, and premium demand. His $85 forecast assumes continued global travel strength. Risks include fuel volatility and delivery delays.
Frontier Group Holdings (NASDAQ:ULCC) was maintained with an Underweight rating and the price forecast was kept unchanged at $5. The airline faces structural disadvantages as an ultra-low-cost carrier. Baker set a $5 forecast, citing persistent earnings pressure from larger rivals' competitive pricing.
JetBlue Airways Corp. (NASDAQ:JBLU) was maintained with a Neutral rating and the price forecast was kept unchanged at $5. Baker rated the airline Neutral, arguing sentiment is too negative despite tailwinds in loyalty and international exposure. A $5 forecast reflects modest upside contingent on execution. Risks include rising costs and a weak domestic recovery.
Southwest Airlines was maintained with an Underweight rating and the price forecast was raised from $28 to $35. Baker argued Southwest Airlines best margin days are past, with peers offering better upside. He expects premium- and international-focused peers to outperform, making the stock overvalued. He set a $35 forecast, noting risks tied to operational performance and valuation compression.
Sun Country Airlines was maintained with an Overweight rating and the price forecast was raised from $18 to $23. The airline earned praise for its charter and cargo mix, posting industry-leading margins. Baker set a $23 forecast, noting risks tied to Amazon cargo volumes and staffing challenges.
United Airlines was maintained with an Overweight rating and the price forecast was raised from $122 to $149. Baker said the airline is best positioned for international and premium demand, assigning a Street-high $149 forecast. Risks include demand softness, labor costs, or execution setbacks.
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