The airline industry enters 2026 in a position few would have predicted during the dark days of the pandemic: major carriers are profitable, premium demand is at record levels, and Wall Street is enthusiastically bullish on the sector's prospects. As Delta Air Lines prepares to kick off earnings season on January 13, the message from analysts is clear—this is the year of the premium traveler, and Delta and United are best positioned to profit.

The contrast with just three years ago is remarkable. Airlines that were burning billions in cash and laying off workers by the tens of thousands are now posting record revenues and expanding premium cabin offerings. The survivors of aviation's near-death experience have emerged leaner, more disciplined, and better attuned to the customers willing to pay for comfort.

Delta Sets the Tone

Delta Air Lines reports fourth-quarter 2025 results on Monday, January 13, and expectations are high. Bank of America projects first-quarter 2026 revenue growth of approximately 5.3%, with earnings per share of 73 cents—a strong start to what analysts expect will be a record year for the Atlanta-based carrier.

The company is expected to provide 2026 guidance starting "with a $17 handle" on earnings per share, implying continued double-digit profit growth even as the broader economy shows signs of cooling. That would translate to approximately $7.17 per share for the full year—a 23% increase from fiscal 2025's estimated $5.82.

"Delta has successfully captured the 'premium leisure' demographic—travelers willing to pay significantly more for extra legroom, lounge access, and superior service. This segment has proven remarkably resilient to economic uncertainty."

— Bank of America Securities airline research

The investment thesis for Delta centers on several structural advantages: the industry's most valuable loyalty program, a fleet weighted toward high-margin international routes, and a brand positioning that commands premium pricing without the operational complexity of ultra-luxury carriers.

United's Aggressive Expansion

United Airlines reports fourth-quarter results on January 20, and the Chicago-based carrier enters earnings season with its own momentum. Analysts project fiscal 2026 earnings per share of $13.15—a 25% increase from the estimated $10.48 in fiscal 2025 and a new record for the company.

United's strategy differs from Delta's in emphasis but shares the same premium focus. The carrier has invested heavily in expanding its international network, betting that the post-pandemic surge in transatlantic and transpacific travel will prove durable. The company's Polaris business class product has drawn favorable comparisons to competitors, supporting premium pricing on long-haul routes.

With operational challenges easing and demand remaining strong, United is expected to generate over $2 billion in free cash flow in 2026, supported by its expansive network and loyal customer base. That cash generation provides flexibility for fleet renewal, debt reduction, and potential shareholder returns.

The Premium Thesis

Both Delta and United have benefited from a fundamental shift in how Americans think about air travel. The pandemic years created a cohort of travelers who had accumulated points and miles, experienced the frustrations of basic economy seating, and emerged ready to pay for comfort. The result has been a sustained surge in premium cabin bookings that shows no signs of abating.

First-class and business-class fares have held firm even as basic economy prices fluctuated with fuel costs and competitive pressure. The premium cabins are where the margin lives—a first-class seat generates significantly more profit than coach, even after accounting for the larger footprint.

Delta has leaned into this dynamic aggressively, expanding premium seating on domestic aircraft and launching enhanced cabin products internationally. United has followed suit, with both carriers effectively conceding the price-sensitive traveler to low-cost competitors while capturing the profitable center of the market.

Capacity Discipline

Perhaps the most important factor supporting airline profitability is capacity discipline. Unlike previous cycles when carriers rushed to add seats and triggered fare wars, the current environment features measured growth that preserves pricing power.

Bank of America Securities analyst Andrew Didora notes that "disciplined capacity growth, resilient premium demand, and easier year-over-year comps" create a favorable setup for airline stocks entering 2026. The reshaping of the industry—with Spirit Airlines bankrupt, JetBlue scaling back, and Southwest restructuring—has reduced competitive pressure on routes that legacy carriers prize.

Industry-wide, domestic capacity is expected to grow only modestly in 2026, well below the historical average. This restraint, whether driven by aircraft delivery delays, pilot shortages, or strategic choice, keeps load factors high and supports fare levels that would be unsustainable in a more competitive environment.

Record Travel Demand

The supply discipline is meeting robust demand. The Transportation Security Administration processed record numbers of travelers during the 2025 holiday season, with eight of the ten busiest days ever at U.S. airports occurring last year. The single-day record, set just after Thanksgiving, shattered previous marks.

Consumer willingness to spend on travel has proven remarkably resilient despite broader economic concerns. The experience premium—spending on vacations, concerts, sporting events—has held up even as goods spending has softened. Airlines, particularly those with premium positioning, are direct beneficiaries of this preference shift.

Looking ahead, forward booking data suggests continued strength. Airlines report healthy demand curves for spring and summer travel, with particularly strong interest in international destinations. The return of Asian travel markets to pre-pandemic levels provides additional upside for carriers with transpacific networks.

Valuation and Risks

Delta trades at approximately 6x forward earnings, while United commands a multiple of roughly 5x. These valuations are compressed relative to the broader market, reflecting historical skepticism about airline stocks as long-term investments.

That skepticism has merit. Airlines are notoriously cyclical, vulnerable to fuel price spikes, economic recessions, and exogenous shocks like pandemics. Labor costs have risen significantly, with pilot contracts reset to reflect post-pandemic supply constraints. The sector's history of value destruction—through bankruptcies, dilution, and poor capital allocation—weighs on valuation multiples.

However, advocates argue that the current generation of airline management has learned from past mistakes. Balance sheets are healthier than pre-pandemic levels. Fleet renewal is proceeding on disciplined timelines. Capacity growth is measured rather than reckless. If these improved behaviors persist, airlines might deserve higher multiples than history suggests.

Investment Takeaway

For investors seeking travel exposure, Delta and United offer differentiated but complementary approaches:

  • Delta provides the premium branding, loyalty program strength, and operational consistency that justify its market-leading position. The company's partnership with American Express generates substantial co-branded credit card revenue that provides earnings stability regardless of travel volumes.
  • United offers more aggressive growth and international exposure, with greater upside if global travel continues to normalize. The company's investment in premium products positions it to capture high-margin demand on long-haul routes.

Both carriers face risks from economic deterioration, fuel price volatility, and operational disruptions. But entering 2026, the airlines are flying with favorable winds—premium demand intact, capacity restrained, and Wall Street finally believing the turnaround story.