In 2024, Boeing shares fell 32% while United Airlines shares gained 135%, easily eclipsing the performance of equities in the six other major U.S. airlines.
Neither scenario is likely to be repeated in 2025, says a top Wall Street analyst.
“My number one pick in every sector is Boeing,” Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors, said Tuesday in an interview. “I think they will be a surprise on the upside and deliver 400 MAXes. You will see cash flow go from flat to five or six, and we know Boeing trades on free cash flow. So I want to own Boeing.”
The Federal Aviation Administration has capped Boeing 737 MAX deliveries at 38 a month, but Link expects the cap to be lifted this year. “Watch what the FAA allows them to do,” she said.
A key factor in the airlines’ success in 2024, when shares in six of the top seven carriers outperformed the S&P 500”s 23% gain, was supply chain woes that kept the carriers from adding aircraft as quickly as they had hoped.
The delays may be saving the airline industry from itself. “We can’t remember a time when industry dynamics have handcuffed management teams from impeding the bull market in airline equities,” JP Morgan analyst Jamie Baker wrote in a report last month.
Link isn’t worried. She says her top airline pick, Delta Air Lines, is perfectly capable of absorbing new capacity into a model that emphasizes premium travel and leads airlines in profitability.
A second 2025 trend that Link sees is declining oil prices as President-elect Donald Trump moves to boost production and de-escalate some international tensions. “If Trump is right, and he can get lower oil prices, that is going to be a nice tail wind for the airline industry,” she said. “We all know that’s what airlines want to see.”
In any case, Link said, while Delta’s 50% share price gain in 2024 trailed United’s gain, “I now think that you want to slowly pivot back to Delta. Delta has the highest ticket prices for premium seats, and 85% of their incremental seats have gone to premium.
“United has had a hell of a run, but I do think Delta is poised to go higher,” said Link, a frequent United passenger who was interviewed by phone while she was seated in a United club at Newark Airport. Her United status is Global Services, which The Points Guy describes as an “ultra-exclusive tier” and “the airline’s ultra-exclusive tier for its most valuable customers.”
Delta will report fourth quarter earnings this coming Friday, Jan. 10, while United will report on Jan. 22.
In late morning trading on Wednesday, Delta shares traded around $60, flat year-to-date. United shares traded around $101, up 3% year-to-date. American shares traded around $17, down about 1% year-to-date, while Southwest traded around $32, down nearly 4% year-to-date.
American shares gained 27% in 2024. Link said she would be a buyer “if I wanted to own the beaten down guy.” She noted that United trades at 9.8 times earnings, Delta at 11.4 times earnings and American at 13 times earnings. “It’s not that I don’t like it,” she said. “But it’s not a really attractive story: Delta is quality and, in a more defensive environment, you want the best in breed. And if United comes down, we can go back in there.”
American has seen shares benefit from its Dec.5 announcement that Citi would become its exclusive credit card issuer. Citi will buy out Barclays, which remains a co-partner until 2026. The deal is important in a world where airlines are often perceived as credit card marketers with fleets of aircraft. Delta, the leader, reported $1.8 billion in third quarter revenue from its deal with American Express. (United’s deal is with Chase.)
Partly because of American’s credit card deal, three analysts this week boosted their outlooks for the carrier. Cowen analyst Tom Fitzgerald upgraded shares to buy with a price target of $25, up from a hold rating with a price target of $17. Fitzgerald said “tailwinds include better domestic pricing, regaining biz traffic & improved credit card economics” as well as likely improvement in Latin America.
“We believe that American has an enviable franchise of its own and should be viewed among the industry ‘haves’ vs the ‘have-nots’,” Fitzgerald said.
Regarding Southwest, Leak said in August that the carrier has “lost its way.” Although hedge fund Elliott Investment Management has reconstituted the board, “It takes a good year for new management to bring in the right people and get the culture to change,” she said on Tuesday.“Southwest still has to find its way. Are their customers going to embrace the new strategies – assigned seating and premium seating – when all they care about is price and getting the lowest fares?