Delta Air Lines DAL and United Airlines UAL  are two well-known names in the Zacks Transportation- Airline industry. These airline heavyweights, along with American Airlines AAL and Southwest Airlines LUV, account for a vast majority of the U.S. airline market. 

Delta, based in Atlanta, GA, is a founding member of the SkyTeam alliance. It is known for its extensive domestic and international network. DAL and its alliance partners collectively serve over 120 countries and territories, with more than 800 destinations served globally. 

United Airlines, on the other hand, is based in Chicago and is a founding member of the world's largest alliance network, Star Alliance. Like DAL, UAL operates both domestically and internationally. Through its vast network, UAL is responsible for connecting around 174 million passengers to more than 360 destinations across six continents. 

Given this backdrop, let’s examine closely to find out which airline heavyweight currently holds the edge, and more importantly, which might be the smarter investment now.

The Case for DAL

Due to the tariff-induced economic uncertainties and the resultant reduction in consumer and corporate confidence, there has been a slowdown in domestic air travel demand, hurting U.S. airline operators like DAL.

Given the lack of visibility, DAL withdrew its full-year 2025 outlook. Management stated that it would provide an update later in the year as visibility improves. To combat the weak demand scenario, DAL is reducing costs by trimming capacity. DAL now expects planned capacity to be flat in the second half of 2025 compared with 3-4% year-over-year growth expected previously, with domestic main cabin seats on the decline. As a result of this turbulent scenario, it is not much of a surprise that DAL expects adjusted revenues for the June quarter to be down 2% to up 2% from the prior year. 

Despite this chaotic situation, there are some positives for DAL. The southward movement of oil price bodes well for the bottom-line growth of Delta. This is because fuel expenses are a significant input cost for the aviation space. Crude oil is struggling in 2025, with prices sliding to multi-month lows. Tariff concerns, weakening consumer confidence, and production increases by OPEC+ have all resulted in this downward pressure. Consequently, expenses on aircraft fuel and related taxes declined 7% year over year in the first quarter of 2025, aiding DAL’s bottom line.

Highlighting its shareholder-friendly stance, DAL’s management resumed paying quarterly dividends in 2023 of 10 cents per share after a COVID-induced hiatus. In June 2024, management announced a 50% hike in its quarterly dividend payout. This was the first dividend increase by DAL since the resumption of its quarterly dividend payments last year. DAL’s dividend yield is currently pegged at 1.43%. In this scenario of uncertainty, DAL’s dividend-paying capacity is a positive for income-seeking investors and highlights confidence in its cash flow and prospects.

Delta’s liquidity position is encouraging. The airline ended first-quarter 2025 with cash and cash equivalents of $3.7 billion, higher than the current debt level of $2.9 billion. This implies that the company has sufficient cash to meet its current debt obligations. DAL's efforts to repay its debts are encouraging, too. The company’s times interest earned ratio of 7.7 compares favorably with the industrial levels.

The Case for UAL

UAL is also suffering from a tariff-induced slowdown in domestic air travel demand. Naturally, domestic travel was soft in the first quarter of 2025. International revenues remained strong in the March quarter, owing to the buoyant demand for long-haul travel. Atlantic unit revenues, or revenue per available seat mile and Pacific revenue per available seat mile were up 4.7% and 8.5% on a year-over-year basis. UAL serves the most international destinations among U.S. carriers. 

Given the market uncertainty and lack of clarity, UAL has offered 2025 earnings per share guidance for two scenarios. In case of a stable market environment, UAL expects 2025 adjusted EPS between $11.50 and $13.50. In a recessionary environment, UAL expects 2025 adjusted EPS between $7 and $9. 

To combat the weak demand scenario, UAL intends to reduce off-peak flying on lower-demand days. To that end, UAL aims to remove 4 points of scheduled domestic capacity, starting in the third quarter of 2025. High labor costs (expenses on salaries and related costs were up 12.8% in 2024) and a very large but aging fleet raise concerns. Delivery delays, predominantly of the 737 MAX, due to production issues at Boeing BA, hampered UAL’s fleet-related plans.  United Airlines flies the Boeing 737 MAX in its fleet, specifically the MAX 8 and MAX 9 variants. Following a series of safety-related incidents, the regulatory body has intensified its scrutiny of Boeing’s 737 MAX variants. 

For 2025, UAL expects to receive multiple Boeing 737 MAX jets. It also expects to receive other jets to modernize its fleet. This will require substantial capex (expected to be less than $6.5 billion in 2025).

Even in this uncertain scenario, UAL is being well-served by the decline in fuel costs. Investor-friendly initiatives add another layer of appeal. In October 2024, UAL announced a $1.5 billion share buyback plan, highlighting its pro-shareholder approach. This was the first buyback program announced by UAL since it suspended share repurchases during the COVID-19 pandemic. UAL repurchased shares worth $451 million through April 10.

How Do Zacks Estimates Compare for UAL & DAL?

The Zacks Consensus Estimate for DAL’s 2025 sales implies a year-over-year decrease of 0.6%, while the same for 2026 shows a 5.7% year-over-year increase. The consensus mark for DAL’s 2025 EPS highlights a 12.7% year-over-year drop. The 2026 EPS consensus mark shows a 24.5% year-over-year increase, reflecting analysts' hope that the current situation would improve. Moreover, the EPS estimates for 2025 and 2026 have been trending southward over the past 30 days.

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The Zacks Consensus Estimate for UAL’s 2025 and 2026 sales implies a year-over-year increase of 2.9% and 8.7%, respectively. The consensus mark for UAL’s 2025 EPS highlights a 3.6% year-over-year drop. The 2026 EPS consensus mark shows a 23% year-over-year increase. Like DAL, EPS estimates for 2025 and 2026 have been trending southward over the past 30 days.

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Disappointing Price Performance of UAL and DAL

Due to the slowdown in domestic air travel demand, airline stocks have performed dismally lately. DAL, UAL and other key players in the industry, such as American Airlines and Southwest Airlines, have declined significantly in the year-to-date period. Shares of Delta Air Lines, United Airlines, American Airlines, and Southwest Airlines have plunged 30.5%, 29%, 43.2% and 19%, respectively.

YTD Price Comparison

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DAL & UAL Trading at Discount to Industry

DAL is trading at a forward sales multiple of 0.44, below its industry’s reading of 0.52X. UAL’s forward sales multiple sits at 0.37, which too represents a discount to the reading of its industry. As a result, both UAL and DAL have a Value Score of A.

DAL’ P/S F12M Vs. UAL & Industry

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Conclusion

The current uncertain scenario is hurting both Delta and United Airlines, as reflected in their disappointing price performance and earnings estimate revisions. Moreover, both are attractively valued.

However, UAL, unlike DAL, doesn’t reward its shareholders with dividends. Dividend-paying stocks are highly sought after, especially in uncertain times like the current scenario. In such a scenario, dividends are major sources of consistent income for investors, though they do not offer dramatic price appreciation. Stocks backed by regular dividends can reduce the volatility of a portfolio. 

Moreover, fleet-related concerns due to delays at Boeing represent another concern for UAL. Delta, unlike UAL, currently does not operate or fly any of the Boeing MAX variants. Moreover, UAL’s high capex requirement, as it maintains a very large fleet in this era of demand weakness, is a concern as well. Given these factors, DAL seems a better pick than UAL now. 

While DAL carries a Zacks Rank #3 (Hold), UAL is currently #4 Ranked (Sell).  

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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This article originally published on Zacks Investment Research (zacks.com).

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