Delta Air Lines (DAL) is set to provide investors with their first major hint as to whether higher airfares are still holding.
That’s important since airline stocks have been squeezed by two competing pressures in 2026. Unpredictable fuel prices have offset strong travel demand.
Now Bank of America believes the setting appears better than feared.
BofA upped price targets for the airline group in a July 1 research report reviewed by TheStreet, suggesting steady demand, stronger fares and reduced fuel costs may support greater profitability into second-quarter results.
The brokerage boosted its price target for Delta to $100 from $93 and for United Airlines Holdings (UAL) to $150 from $145. It also boosted objectives on American Airlines Group, Southwest Airlines, Alaska Air Group, JetBlue Airways, Frontier Group Holdings and Allegiant Travel.
The call arrives at a vital juncture.
Delta said it will report its financial results for the June quarter of 2026 at 10 a.m. ET on July 10, the company said in a statement. United is scheduled to hold its second-quarter earnings call on July 16, according to its investor-relations calendar.
However, BofA’s message is not entirely clear.
Still, the firm said summer capacity is tight enough to maintain pricing. But capacity is anticipated to rise later in 2026, increasing the danger that airlines would erode some of their unit-revenue gains beyond the peak travel season.
Delta stock gets the first test of BofA’s airline call
Delta is the cleanest opening act to the airline earnings season.
The Atlanta-based airline is the first to report, and BofA expects its remarks on demand and pricing to be encouraging. BofA estimates Delta’s second-quarter unit revenue growth at 13.4%, up from its prior 12% forecast, with EPS of $1.48 near the high end of guidance. BofA also boosted its third-quarter unit sales forecast for Delta to 14.7% from 10.8%, pushing its EPS estimate to $2.48 from $1.67.
That’s a big swing considering Delta began the quarter with a fuel problem.
Delta stated in April its second-quarter projection included an all-in fuel price of around $4.30 a gallon, including a refinery benefit of nearly $300 million. The company also announced operational revenue of $15.9 billion and operating cash flow of $2.4 billion for the March quarter.
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Lower gasoline prices and stronger revenue forecasts are helping to lift BofA’s estimates. The firm expects Delta’s adjusted diluted EPS for 2026 to be $6.50, the low end of Delta’s previous guidance range of $6.50 to $7.50. It also retained its Buy rating, highlighting Delta’s premium and corporate exposure, margins and free-cash-flow profile.
BofA analysts wrote, “We see a constructive setup into 2Q26 earnings.”
Delta shares recently traded at $92.75, giving the airline a market cap of about $60.9 billion.
United stock has a similar setup, but a different risk
United tells investors a different story of the same event.
The Chicago-based carrier has focused on premium cabins, international routes and loyalty revenue which might help safeguard margins when lower-end leisure demand gets more competitive.
Premium demand held up well, as shown in United’s first quarter earnings. The airline posted adjusted diluted EPS of $1.19, an increase of 31% from a year ago. Total operating revenue increased 10.6% from a year ago. Total revenue per available seat mile climbed 6.9%, the company’s results release said.
But United also noted the fuel-pressure problem earlier this year.
United CEO Scott Kirby indicated in April that rates could have to go up 15% to 20% to cover a hike in aircraft fuel costs, Reuters reported. United has previously implemented many fare hikes, and the firm stated it has not observed a harm on demand at this stage.
This is why the new BofA note matters a lot.
BofA now expects United’s second-quarter unit revenue to grow 13.5%, up from its earlier forecast of 12.8%. It also projects third quarter unit revenue growth of 15.6%, supported by ongoing demand, price hikes working their way through the booking curve and slower capacity development. BofA upgraded its 2026 EPS forecast for United to $11.15 and boosted its price goal to $150 from $145.
United’s shares last traded at $133.32, giving the firm a market worth of around $43.3 billion.
Airfare data backs up BofA’s pricing argument
BofA’s optimistic airline call is based on one concept in particular: Customers are still paying up.
There is evidence outside of that which supports such a notion.
Airfares surged 26.7% year-over-year in May, and 2.7% month-over-month, according to the Travel Price Index from the U.S. Travel Association. Jet fuel prices have declined around 35% since highs above $4.88 a gallon in early April, but prices still were above year-earlier levels, it said.
Key takeaways from BofA’s airline call
- BofA raised price objectives across the airline group.
- Delta Air Lines reports first on July 10.
- BofA raised Delta’s price objective to $100 from $93.
- BofA raised United Airlines Holdings to $150 from $145.
- The firm expects stronger third-quarter unit revenue for both Delta and United.
- Lower fuel prices are helping earnings estimates.
- Fourth-quarter capacity growth remains the main risk to the call.
Data from the Airlines Reporting Corp. also show pricier tickets. May U.S. travel agency air ticket sales were $9.8 billion, up 15% year over year, and the average ticket price increased 18% to $628, ARC said. Passenger journeys were flat at 25.7 million.
More Airlines:
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- Delta Air Lines cuts two flights forever, refunds available
- Spirit Airlines won’t be coming back, and that costs flyers money
That blend is important.
If ticket sales are growing faster than flights, airlines are earning more revenue per passenger, not only more volume.
The demand background has not dropped, however, according to TSA data. Checkpoint travelers were 2.93 million on June 28, 2.90 million on June 26, and 2.91 million on June 25, according to the agency.
Airline stocks still face a late-year capacity problem
The danger is not demand at this moment.
The risk is supply.
BofA believes domestic capacity is anticipated to expand just 0% to 1% through September, a supportive environment for fares. But schedules now show domestic capacity growth of 3.9% in October and 6.9% in November. The business anticipates some schedules will be revised lower but says cuts could be less harsh than those issued ahead of the third quarter.
That’s the tension to watch for investors.
Lower fuel prices help earnings, but they can also tempt airlines to add back flying. If too many seats return in the fourth quarter, unit revenue could moderate even if demand remains healthy.
BofA’s broader data is already pointing in that direction. The firm also expects system capacity to accelerate in the fall, with system growth of 3.3% in October and 4.8% in November, versus domestic growth of 3.9% and 6.9%.
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BofA’s near-term message is certainly more positive for now.
Fares are steady. Fuel is easier. Summer capacity is restrained. BofA thinks exposure to premium and corporate travel is positive for Delta and United.
But the next phase of the airline trade might hinge less on how robust July travel appears and more on what executives say about October and November schedules.
If airlines can stay disciplined, the current earnings adjustments may hold up.
As capacity increases at a rapid clip, the pricing leverage that is benefiting Delta and United could soon erode.
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