Citigroup: The three “supercarriers” will welcome the “supercycle” American Airlines (AAL.US), Delta (DAL.US), and United Airlines (UAL.US), and United Airlines (UAL.US) ready to take off

The Zhitong Finance App learned that Citi research indicates that poor performance and capacity cuts in the aviation industry in 2025 have created a “bullish tactical cyclical environment” for 2026, especially for giants called “superairlines.” The agency anticipates that their outstanding performance will be more resilient and sustainable than most optimistic expectations.

Citibank analyst John Godyn defines traditional airlines such as American Airlines (AAL.US), Delta Air Lines (DAL.US), and United Airlines (UAL.US) as “supercarriers”. He believes that the core advantage of these carriers is “successfully integrating new travel business models with unique asset portfolios, and this asset barrier is difficult for both existing competitors and new entrants to replicate.” As shown by these supercarriers, this business model made the industry perform well both during the downturn and rise.

In contrast, the traditional low cost airline (LLCC) business model was mainly formed and perfected under conditions and assumptions that are different from the characteristics of today's market. They serve a category of travelers who choose airlines based solely on the lowest fares and basic services.

However, as this easy-to-replicate business model saturates the market and airlines are no longer able to stimulate demand through lower fares, traditional low-cost carriers are now being restructured through transformation plans. These plans draw heavily on the practices of supercarriers, but they lack the “differentiated asset advantage that supercarriers have accumulated through decades of investment.”

Therefore, the anticipated “supercarrier supercycle” will widen the gap that has formed between supercarriers and traditional low-cost airlines since the COVID-19 pandemic, and is more beneficial to supercarriers.

Godyn further stated, “Although most supercarriers have achieved significant excess profits in the recent downturn in the aviation industry, the upward elasticity of profits may still exceed investors' expectations as the industry cycle accelerates recovery.”

Among the three airlines (United Airlines, American Airlines, and Delta Air Lines) that Citi gave a “buy” rating, Delta was the only one that was removed from the “high risk” rating by Godyn, which “fully reflects the sustainability and stability of its long-term strategy.”

Godyn predicts that United Airlines will use its international route advantage to become the company with the highest earnings per share peak in 2019 among all major airline companies; and if American Airlines can effectively implement strategies to regain market share in corporate travel and high-end travel, it will have the most significant upward potential among the three.

Although Alaska Airlines (ALK.US) is not a superairline in the strict sense of the word, Godyn gave it a “buy” rating because the company's management's strategic plan “clearly aims to further strengthen the core competitiveness of such supercarriers.”

Meanwhile, two traditional low-cost carriers, JetBlue (JBLU.US) and Southwest Airlines (LUV.US), are trying to reshape their business models in a similar way to traditional airlines. For JetBlue, its “JetForward” plan may bring about a substantial increase in stock prices, but Godyn maintained a “selling/high risk” rating for the stock until performance improved markedly.

As for Southwest Airlines, Godyn questioned its transformation plan less than JetBlue and gave it a “neutral/high risk” rating due to active rights investors. However, Southwest Airlines copying its operating strategy in the absence of a superairline's core advantage may result in “unusually significant brand/customer perception misalignment and execution risk.”