Citi Research highlights that the underperformance and capacity cuts in the airline industry in 2025 have set the stage for a "tactically bullish cyclical environment" in 2026, particularly for major carriers it terms "super airlines." The firm expects their outperformance to be more resilient and sustained than even the most optimistic forecasts.
Citi analyst John Godyn defines traditional carriers like American Airlines (AAL.US), Delta Air Lines (DAL.US), and United Airlines (UAL.US) as "super airlines," emphasizing their core strength lies in "successfully integrating new travel business models with unique asset portfolios—advantages that are difficult for competitors or new entrants to replicate." This business model has allowed these super airlines to excel during both industry downturns and upswings.
In contrast, traditional low-cost carriers (LLCCs) developed their business models under different market conditions and assumptions, primarily serving price-sensitive travelers who prioritize the lowest fares and basic services. However, as this easily replicable model saturates the market and airlines can no longer stimulate demand with lower prices, LLCCs are now restructuring through transformation plans. While these plans borrow heavily from super airlines, they lack the "differentiated asset advantages built over decades of investment by super airlines."
As a result, the anticipated "super airline super cycle" is expected to widen the performance gap between super airlines and LLCCs that emerged post-pandemic, further favoring the former. Godyn notes, "Even though most super airlines have already delivered significant outperformance in the recent downturn, their earnings upside elasticity could still exceed investor expectations as the industry cycle accelerates its recovery."
Among the three airlines rated "Buy" by Citi (United, American, and Delta), Delta is the only one with its "High Risk" rating removed, reflecting "the consistency and stability of its long-term strategy." Godyn predicts United will post the largest EPS growth above 2019 levels among major airlines, thanks to its international route strength. Meanwhile, American Airlines could have the most upside potential if it successfully executes its strategy to regain corporate travel and premium market share.
Although Alaska Air (ALK.US) is not strictly a super airline, Godyn maintains a "Buy" rating, citing management’s strategic plan to "further strengthen its super airline-like core competitiveness." On the other hand, traditional LLCCs like JetBlue (JBLU.US) and Southwest (LUV.US) are attempting to reshape their business models similarly to legacy carriers.
While JetBlue’s "JetForward" plan could drive material stock upside, Godyn retains a "Sell/High Risk" rating until clear performance improvements emerge. For Southwest, he assigns a "Neutral/High Risk" rating, acknowledging activist investor pressure but warning that adopting super airline strategies without their core advantages may lead to "significant brand/customer misalignment and execution risks."
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