In a bullish client note released today as a preview for Q4 earnings, Susquehanna’s Christopher N. Stathoulopoulos upgraded American Airlines Group Inc. (AAL) and Sun Country Airlines Holdings Inc. (SNCY) to Positive ratings, citing a favorable industry outlook and company-specific catalysts. Stathoulopoulos raised AAL’s price target to $20 per share from $14, and SNCY’s price target to $20 per share from $12.
The upgrades come as the airline sector braces for a rebound in air travel demand, disciplined capacity growth, and a shift toward premium services that could bolster margins through 2027. Stathoulopoulos, a veteran airlines analyst, emphasized that these factors create a “constructive fundamental backdrop” for select carriers, particularly those leveraging premium offerings and diverse revenue streams.
The broader airline industry is poised for recovery in 2026, according to the note. Stathoulopoulos highlights several tailwinds driving demand: a rebound following the recent U.S. government shutdown and FAA-mandated schedule reductions; major events like Americas250 celebrations, U.S. midterm elections, the FIFA World Cup, and the Olympic Winter Games; easy year-over-year comparisons due to prior macro and geopolitical volatility; potential economic stimulus; stricter in-office work policies boosting business travel; and sustained appetite for premium products.
Crucially, he points to U.S. carriers’ supply discipline, with available seat miles (ASMs) expected to grow only in the low-single digits—a “RASM-supportive baseline” that should prevent oversupply and support unit revenue growth.
For American Airlines, Stathoulopoulos’ upgrade from Neutral to Positive is based on the carrier’s aggressive push into premium offerings, which he believes will narrow the margin gap with peers like Delta Air Lines (DAL) and United Airlines (UAL). AAL is “leaning into its premium products,” the analyst notes, with initiatives designed to transform the airline into a technology-driven merchandising powerhouse. Key efforts include expanding high-margin premium inventory: AAL plans to increase premium seats by about 30% and lie-flat seats by 50% by 2030, aided by new Boeing 787-9P and Airbus A321XLR aircraft. Lounge expansions are also underway, such as a new Flagship and Admirals Club at Philadelphia (PHL) in May 2025, a grab-and-go concept at Charlotte (CLT), and additional Flagship lounges in Miami and Charlotte.
Enhancing the passenger experience, AAL will roll out free high-speed Wi-Fi for AAdvantage loyalty members across its entire narrowbody and dual-class regional fleets starting January 2026. New amenity kits and artisan food and beverage options on select international and transcontinental routes further underscore this premium focus, positioning free Wi-Fi, in-seat power, entertainment, and curated F&B as “core to the product/drivers of brand equity.”
Beyond premiums, AAL’s new co-brand credit card deal with Citibank, effective January 2026, is projected to drive 10% annual growth in cash remuneration from partners, adding an incremental $1.5 billion in EBIT by 2030 compared to the trailing 12 months through 3Q25. The carrier also anticipates recovering its historical share of indirect corporate sales channels by year-end 2025. Network tactics, including growth at northern hubs and expanding Dallas-Fort Worth (DFW) from nine to 13 banks, should synergize with these efforts to improve unit margins.
Financially, Stathoulopoulos models robust growth for AAL. He forecasts 2026 adjusted earnings per share of $1.75 (down from prior $1.85 but reflecting refined assumptions) and 2027 EPS of $2.50. For fiscal year 2027, base-case assumptions include +4% ASMs, +3% total revenue per available seat mile (TRASM), and +2.5% cost per available seat mile excluding fuel (CASM-Ex). Adjusted EBITDAR is projected at $6.86 billion in 2027, with a target multiple of 5x—below peers due to AAL’s leverage (3Q25 trailing net-debt-to-EBITDAR ~5x, targeting ~3x by 2027). The price target rises to $20 from $14, implying 25% upside from the current $15.73, based on an 8x P/E multiple (up 0.5x).
Sun Country’s upgrade reflects its hybrid low-cost model and counter-cyclical strengths, particularly in cargo and charter operations. Stathoulopoulos sees “meaningful margin expansion” from restoring Scheduled Service post-Amazon fleet deployment and maturing its transportation services agreement (TSA) with Amazon. The asset-light long-term capacity purchase agreement (CPA) with Amazon, alongside charter revenue (mostly under long-term contracts with ad-hoc optionality), provides stability. With no major aircraft capex until late 2027, Sun Country should generate substantial free cash flow: 2027 FCF per share is modeled at ~$4.95, yielding approximately 20%.
Metrics for SNCY include 2026 adjusted EPS of $1.50 (up from $1.60 prior) and 2027 EPS of $2.10. Susquehanna’s price target jumped to $20 from $12, offering 31% upside from $15.35.
Overall, Stathoulopoulos raised price targets across the sector, rolling valuations to 2027 estimates as he expects approximately 25% group earnings per share growth. He prefers carriers with premium focus and idiosyncratic opportunities, like AAL and SNCY, in a landscape where supply restraint and demand recovery could sustain momentum.
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