Hot Picks: Three U.S. airline stocks to watch as fuel costs rise

Three U.S. carriers are highlighted as potentially better positioned to weather higher fuel costs, according to UBS equity analyst Atul Maheswari. Delta Air Lines, United Airlines and Southwest Airlines are cited for their balance sheets, margins and diversified revenue streams.

Delta is described as well-positioned due to its premium exposure and ongoing premiumization strategy. The airline reportedly maintains solid margins, substantial cash flow, and a strong balance sheet even amid fuel-driven earnings volatility.

United Airlines is noted for its diversified revenue mix, including premium seating, loyalty programs, cargo, and, for Delta, maintenance, repair, and operations in some cases. Business travel is portrayed as a meaningful driver, contributing to resilience during tougher periods.

Southwest Airlines is praised for past model changes that boosted appeal, such as introducing premium seating and adjusting policies on seating and bags. These moves are linked to improved margins and ongoing execution that support profitability under current fuel conditions.

The discussion also touches on loyalty and credit card programs as important, higher-margin revenue streams for these airlines. Analysts expect continued benefit from loyalty-based repeat business and the associated profitability as these programs expand.