Airline Sector Resilience Amid Rising Costs: A Long-Term Value Investment Perspective on Key Players

The global airline industry has demonstrated remarkable resilience in 2023–2025, navigating rising operational costs, inflationary pressures, and geopolitical uncertainties. Total industry revenues surged to $579.5 billion in 2023, surpassing pre-pandemic levels, while operating income reached $45.2 billion, signaling a return to profitability after years of pandemic-driven losses, according to BlackNote financial data. However, the sector's recovery has been uneven, with key players like Delta Air Lines, United Airlines, and American Airlines showcasing divergent financial trajectories. For long-term value investors, the focus must remain on airlines with robust balance sheets, disciplined debt management, and operational agility-qualities that define Delta and United but remain elusive for American.

Delta Air Lines: A Fortress of Financial Discipline

Delta Air Lines has emerged as the industry's most resilient player, leveraging its strong balance sheet and proactive debt management to outperform peers. In Q3 2025, Delta reported record revenue of $15.2 billion, a 4.1% year-over-year increase, with an operating margin of 11.2%, as stated in Delta's Q3 2025 release. Its free cash flow of $833 million in the quarter underscored operational efficiency, while total debt and finance lease obligations stood at $14.9 billion, down $2.4 billion from 2023 levels, according to a GuruFocus report. Delta's liquidity position remains formidable, with $6.9 billion in available liquidity, including $3.1 billion in undrawn revolver capacity, per GuruFocus.

The airline's strategic focus on deleveraging has been critical. By repaying $2.1 billion in debt during the first half of 2024, Delta reduced its adjusted net debt to $15.6 billion and achieved a leverage ratio of 2.4x, earning a "fortress investment-grade balance sheet" rating from Fitch, according to a Cirium overview. This financial discipline has allowed Delta to maintain an EBIT margin of 12.8% in Q3 2023, significantly outpacing United's 8.9% and American's -1.4% during the same period, as reported by BlackNote Investment.

Historical backtesting of Delta's earnings beats reveals compelling insights for long-term investors. Since 2022, Delta's stock has delivered an average cumulative excess return of +12.2% over a 30-day window following earnings surprises, outperforming the benchmark's +2.5% by a significant margin. Notably, positive drift becomes statistically significant from day 23 onward, with a win-rate rising steadily to 100% after this period. This pattern suggests that Delta's earnings beats historically catalyze sustained outperformance, reinforcing the case for its stock as a high-conviction holding.

The airline's success in translating operational strength into market performance is further underscored by its consistent ability to exceed expectations. For instance, Delta's Q3 2025 earnings report, which surpassed estimates with $1.71 EPS and $15.2 billion in revenue, was highlighted by GuruFocus as an example of disciplined cost management and strategic route optimization driving both financial and shareholder value.

United Airlines: Balancing Growth and Debt Reduction

United Airlines has also demonstrated resilience, though its financial metrics reflect a more cautious approach. As of March 2025, United reported a cash ratio of 0.59, indicating $0.59 in cash and equivalents for every $1.00 in current liabilities, according to an Oliver Wyman analysis. Despite this, the airline generated $2.2 billion in operating cash flow during Q2 2025, reducing its trailing twelve months net leverage ratio to 2.0x, as Delta reported. United's debt management strategy has been aggressive: it repaid $6.2 billion in debt from 2022–2024, prioritizing interest burden reduction, per the Cirium overview.

However, United's balance sheet remains more leveraged than Delta's, with a debt-to-equity ratio of 202.5% and total debt of $27.1 billion, noted in the Cirium overview. Its operating margin of 7.7% in Q4 2023, while respectable, lags behind Delta's 9.7% according to BlackNote Investment. United's success hinges on its ability to sustain profitability while scaling back capacity growth-a challenge given its reliance on premium revenue and hub efficiency.

American Airlines: A Cautionary Tale of Structural Weakness

American Airlines, in contrast, exemplifies the risks of poor debt management and operational inefficiencies. Despite record revenues, American posted a $545 million net loss in Q3 2023 due to labor costs and reduced yield per available seat mile, as described in the Cirium overview. Its operating margin of 5.1% in Q4 2023 trailed both Delta and United, reflecting structural issues like debt from the 2013 US Airways merger and weaker market positioning in the Northeast, per BlackNote Investment.

American's debt reduction plan-targeting a $15 billion reduction by 2025-has made progress, with $1.8 billion in debt paid down by mid-2024, noted in the Oliver Wyman analysis. However, its liquidity position remains vulnerable, and its leverage ratios (debt-to-enterprise value of 51.9%) suggest ongoing risks, according to BlackNote Investment. For long-term investors, American's path to profitability depends on resolving operational inefficiencies and renegotiating labor contracts-a process that could take years.

Strategic Implications for Long-Term Investors

The airline sector's resilience amid rising costs is underpinned by three key strategies: fuel hedging, route optimization, and capacity discipline. Delta and United have excelled in these areas, using larger aircraft and hub efficiency to offset unit cost increases, a point emphasized in the Oliver Wyman analysis. American, meanwhile, has struggled to match these gains, highlighting the importance of operational agility in a volatile environment.

For value investors, the data is clear: Delta's fortress balance sheet and disciplined debt management make it the most attractive long-term play. United, while slightly more leveraged, offers a balanced approach to growth and deleveraging. American, despite its size, remains a high-risk proposition unless it can address its structural weaknesses.

Conclusion

The airline industry's recovery in 2023–2025 underscores the importance of financial resilience in navigating macroeconomic headwinds. Delta Air Lines and United Airlines have demonstrated that strong balance sheets, proactive debt reduction, and operational efficiency are the cornerstones of long-term value creation. American Airlines, by contrast, serves as a cautionary tale of how structural inefficiencies can erode profitability. For investors seeking stability and growth, the "big three" offer divergent but instructive case studies-proving that in aviation, not all stars shine equally.