Airline Stocks 2026 Outlook: BofA Upgrades Allegiant (ALGT), Cuts Frontier
The outlook for airlines in 2026 appears positive, as limited capacity growth, strong demand in premium segments, and more favorable year-over-year comparisons are expected to drive higher unit revenues.
Rating Revision
BofA Securities analyst Andrew G. Didora expects Delta Air Lines, Inc. (NYSE:DAL) and United Airlines Holdings, Inc. (NASDAQ:UAL) to lead the industry in 2026 free cash flow, generating over $3 billion and $2 billion, respectively.
On the other hand, the analyst expects economic stimulus to favor low-cost carriers (LCCs).
Also Read: Alaska Air Group’s Hawaiian Airlines Plans Over $600M, Five-Year Investment
Consequently, Didora upgraded Allegiant Travel Company (NASDAQ:ALGT) to Neutral (from Underperform) on its controlled capacity and cost-efficient deployment of the 737 MAX.
Meanwhile, the analyst downgraded Frontier Group Holdings, Inc. (NASDAQ:ULCC) to Underperform (from Neutral) due to relative expense excluding sale-leaseback gains.
Alaska Air Weighed By Industry Headwinds
Additionally, the analyst reiterated a Buy rating on Alaska Air Group, Inc. (NYSE:ALK) and raised the price target to $70 from $62.
Didora notes that the company faced broader industry headwinds, compounded by IT outages in July and October and higher West Coast jet fuel costs, which pressured results in the third and fourth quarters of 2025.
Looking ahead to 2026, the analyst expects the company to gain significantly from Hawaiian integration synergies, improving both unit revenues and cost efficiency, while continuing to benefit from strong premium revenue trends.
JetBlue Capacity Growth Rebound
JetBlue Airways Corporation (NASDAQ:JBLU) kept an Underperform rating with a price forecast of $4.
The analyst updated fourth-quarter estimates to reflect holiday weather disruptions that caused over 400 flight cancellations.
The analyst revised capacity growth estimates to -1.8% (from -1.3%), raised unit costs estimates to +5.3% (above 3%–5% guidance), and revised unit revenues slightly higher to -1.9% from -2.2%.
Didora estimates 2026 EPS of $(1.08) is in line with consensus, while the first quarter FY26 EPS estimate of $(0.60) is slightly below the Street's $(0.54).
2026 Sector Projection
The analyst projects U.S. domestic capacity growth of roughly 2.5% in 2026, with industry growth around 1.8% if Spirit reduces capacity by 50% versus its current plan of a 20% cut.
With BofA Economics forecasting +2.4% real GDP growth, passenger demand could rise over 3.5% if the historical 1.4x demand-to-GDP ratio holds.
Also, the analyst notes that the airlines could benefit from easier comps, as first-half FY25 demand fell 1.6%.
Stronger demand relative to supply should support unit revenue growth and drive airline valuations, the analyst adds.
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