Top Airline Stocks to Watch as Fuel Volatility Tests the Sector
Airline stocks are heading into the third-quarter earnings season with a complicated mix of strong travel demand and unusually high fuel-price volatility.
Evercore ISI recently highlighted Delta Air Lines, United Airlines, Copa Holdings and Allegiant Travel among its preferred airline stocks as the industry navigates changing fuel costs and relatively resilient unit revenue. The analysis also points to Alaska Air Group as a company with longer-term earnings potential if it meets its future targets. These are analysts' views, not guarantees of future stock performance.
The backdrop remains challenging. Brent crude moved between roughly $68 and $131 a barrel during the third quarter, while Gulf Coast jet fuel ranged from approximately $2.69 to $4.70 per gallon, according to the Evercore analysis cited by Investing.com.
For airlines, that kind of volatility can quickly change earnings expectations because fuel is one of the industry's largest operating expenses.
Why Fuel Prices Matter So Much for Airline Stocks
Airlines operate with relatively thin margins compared with many other industries, meaning a sharp increase in fuel costs can have a disproportionate impact on profits.
IATA said in August that fuel was consuming almost one-third of airline operating costs amid the energy-market disruption. Its June 2026 outlook projected average jet-fuel prices of about $152 a barrel for the year, almost 70% above the 2025 average.
That creates a difficult pricing equation for airlines.
Carriers can increase ticket prices or reduce capacity to offset higher costs, but they cannot always pass fuel increases to passengers immediately. Tickets are often sold well before the flight, while fuel prices can change rapidly.
Reuters reported in September that American Airlines, United Airlines and Southwest Airlines were adjusting planned capacity because of the fuel shock, even though demand remained relatively strong.
This makes fuel prices one of the most important variables for airline investors heading into earnings season.
Delta Air Lines: Profit Share Has Improved
Delta Air Lines is one of the airline stocks receiving attention from Evercore ISI.
The research cited by Investing.com said Delta's share of combined pretax profits among the four major U.S. airlines had increased to 51% from 42% over the past two years.
Delta has also demonstrated an ability to maintain its profit outlook despite the fuel shock. In July, Reuters reported that the carrier reaffirmed its 2026 profit forecast and issued a stronger-than-expected third-quarter outlook, arguing that fare increases could remain in place even if fuel prices moderated.
The key issue now is whether revenue strength can continue to offset elevated fuel expenses.
Investors will also be watching Delta's premium travel exposure, corporate demand and capacity discipline. These factors can influence revenue per available seat mile, an important airline measure that tracks how much revenue carriers generate from their available capacity.
United Airlines: Capacity Discipline Becomes Important
United Airlines is another carrier highlighted by Evercore ISI.
The brokerage's thesis is tied partly to potential normalization in the airline industry as carriers adapt to the current operating environment.
United has already been adjusting its schedule in response to higher fuel costs. Reuters reported earlier in September that the carrier had canceled some December flights and could make additional changes if fuel prices remained elevated.
That strategy illustrates a broader shift across the industry: airlines are becoming more selective about capacity rather than automatically adding flights to gain market share.
For shareholders, this can be important because reducing less-profitable flying can protect margins even when headline passenger demand remains strong.
United shares closed at $112.65 on September 29, up 1.02%, while Delta rose 1.00% and American Airlines gained 0.67%.
Daily stock movements, however, should be separated from the longer-term earnings picture.
Copa Holdings Offers International Exposure
Copa Holdings is another name on Evercore ISI's preferred list.
Copa provides exposure to international air travel through its Panama-based network and can therefore behave differently from large U.S. carriers.
Its inclusion is notable because investors are increasingly looking beyond the biggest U.S. airlines for companies with different network structures and operating economics. Evercore's view, as reported by Investing.com, focuses on looking beyond the immediate fuel-price volatility toward normalization in the sector.
For investors, the important variables include passenger yields, capacity growth, fuel consumption, currency movements and international travel demand.
Allegiant Travel: A Different Airline Model
Allegiant Travel also appeared among Evercore ISI's preferred airline stocks.
Allegiant has historically focused heavily on leisure-oriented travel and smaller markets, giving it a different business profile from network carriers such as Delta and United.
That difference matters when evaluating airline stocks because the impact of fuel prices depends not only on the price of fuel but also on the carrier's route network, aircraft utilization, pricing power and customer mix.
A leisure-focused carrier can benefit from strong vacation demand, but it can also be more exposed to changes in discretionary consumer spending.
Alaska Air Group Has a Longer-Term Catalyst
Alaska Air Group is another stock worth watching, although Evercore's discussion places more emphasis on its potential longer-term earnings trajectory.
Reuters reported on September 29 that Alaska is increasing its focus on premium travel as higher fuel costs pressure profitability. The company plans to add lie-flat Aurora Suites to at least 25 Boeing 737 MAX 10 aircraft, expand premium cabins and add lounges at several airports.
Alaska expects premium revenue to rise to more than 40% of total revenue by 2030, compared with 36% in 2026, according to Reuters. The company is also targeting a larger international presence from Seattle following its acquisition of Hawaiian Airlines.
At the same time, Alaska has withdrawn its previous 2027 earnings projection because of fuel costs and uncertainty. That makes execution and fuel prices particularly important variables for investors.
American Airlines and Southwest Show the Risk
Not every airline currently offers the same earnings backdrop.
American Airlines Group has faced particularly strong fuel-cost pressure. Reuters reported in July that American cut its 2026 earnings outlook, warning that higher jet-fuel expenses could leave it around breakeven despite record revenue, higher fares and resilient travel demand.
Evercore's analysis also showed a significant change in pretax profit contribution among the major U.S. airlines. American's share fell from 15% two years earlier to an estimated negative 5%, reflecting an assumed pretax loss for 2026.
Southwest Airlines has a different trajectory. Its share of the big-four pretax profit pool increased to 19% from 6%, according to the same Evercore analysis, after two consecutive years of capacity growth below GDP growth.
These differences underline why airline stocks should not be treated as one homogeneous trade.
Strong Demand Is Helping, But It Has Limits
The encouraging part of the current sector outlook is that demand has remained relatively resilient despite higher fares.
Evercore said demand commentary remains broadly constructive and that fall transatlantic travel appeared stronger than peak summer travel.
But higher fares have a limit.
If airlines continue raising prices to offset fuel expenses, consumers may eventually reduce discretionary trips or shift toward cheaper routes and carriers. That creates a balancing act between protecting revenue per passenger and maintaining load factors.
Recent U.S. consumer-confidence data also showed increased economic caution, adding another variable for investors to monitor.
What Airline Investors Should Watch Next
The third-quarter earnings season will provide a clearer picture of how airlines are absorbing the fuel shock.
Key indicators include:
Jet-fuel and crude-oil prices
Revenue per available seat mile
Passenger yields and average fares
Load factors
Capacity growth
Fuel-hedging levels
Unit costs excluding fuel
Premium and corporate travel demand
Free cash flow
2027 capacity and earnings guidance
Fuel hedging is particularly important. IATA said global airlines had hedged roughly one-third of expected 2026 fuel consumption, which provides some protection but does not eliminate exposure to sustained price increases.
Airlines with stronger pricing power, disciplined capacity and better fuel protection may experience a different earnings impact from those with weaker margins or greater exposure to spot fuel prices.
Conclusion
Airline stocks are entering a crucial period in which strong travel demand is competing with unusually volatile fuel costs. Delta, United, Copa Holdings and Allegiant are among the stocks highlighted by Evercore ISI, while Alaska Air Group offers a separate longer-term earnings story tied to premium travel and international expansion.
The most important takeaway for investors is that airline performance will likely depend on the interaction between fuel prices, fares, capacity discipline and demand, rather than any single factor. Third-quarter earnings and management guidance should provide the next major test of how effectively carriers are adapting.
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This article is for informational and educational purposes only and should not be considered investment advice.