The Surge in LAX Passenger Traffic and Its Implications for Airline Stocks and Airport Infrastructure REITs

The Los Angeles International Airport (LAX) has long been a linchpin of U.S. air travel, but its recent performance underscores its growing significance as both a transportation hub and an economic engine. In Q3 2025, LAX reported a 4.3% year-over-year increase in passenger traffic, handling 33.6 million domestic and 16 million international passengers in the past year as of September 2025. This surge, driven by a mix of leisure and business travel, presents compelling opportunities for investors seeking to leverage short-term demand spikes for long-term portfolio positioning, particularly in airline stocks and airport infrastructure real estate investment trusts (REITs).

Passenger Traffic Trends: A Dual-Driven Growth Story

LAX's passenger traffic growth reflects a broader shift in travel dynamics. Domestic travel accounts for 79% of total traffic across California's top ten airports, with LAX as the dominant contributor. While international traffic remains a smaller but critical segment, the airport's ability to balance both streams-supported by its status as the second busiest in the U.S.-highlights its resilience. For instance, in July 2025 alone, LAX handled 7.2 million passengers, a figure that underscores its role as a gateway for both U.S. and global travelers.

This dual-driven growth is not merely a short-term rebound but a structural trend. The airport's $30 billion capital improvement program, including the Automated People Mover and the Central Terminal Area (CTA) expansion, is set to enhance connectivity and passenger experience, further solidifying LAX's appeal. Such infrastructure investments are likely to sustain demand even as macroeconomic headwinds emerge.

Airline Stocks: Southwest's Q3 Performance as a Barometer

The surge in LAX traffic has directly benefited airlines operating at the airport, with Southwest Airlines serving as a prime example. In Q3 2025, Southwest reported record operating revenue of $6.9 billion, driven by improved unit revenues and cost management. The carrier's net income of $54 million, or $0.10 per diluted share, reflects its ability to capitalize on LAX's growing passenger base.

Southwest's success is emblematic of a broader trend: airlines with strong LAX exposure are leveraging the airport's traffic growth to boost profitability. For investors, this signals an opportunity to target airlines that have optimized their route networks and operational efficiency to align with LAX's demand drivers. However, the focus should extend beyond immediate gains. Airlines like Southwest are also investing in customer experience enhancements-such as new seating options and expanded partnerships-which position them for long-term competitiveness in a market where LAX's influence is expanding.

Airport Infrastructure REITs: Capitalizing on Premiumization and Accessibility

Beyond airlines, airport infrastructure REITs stand to gain from LAX's transformation. The airport's $1.5 billion roadway project, approved in late 2025, is expected to reduce regional traffic congestion, making commercial districts like Westchester and El Segundo more attractive for corporate and logistics operations according to industry analysis. This infrastructure-driven premiumization is already boosting property values and rental yields for REITs focused on the southern Los Angeles area.

Moreover, the APM's delayed but inevitable 2026 completion will enhance accessibility to the CTA, further amplifying demand for real estate near transit hubs. REITs with exposure to El Segundo and Hawthorne-areas witnessing tech and aerospace expansion-are particularly well-positioned to benefit according to market research. For investors, this represents a chance to align with long-term value creation, as LAX's non-aeronautical revenue streams (e.g., retail, dining) and infrastructure projects drive sustained growth in adjacent real estate markets.

Strategic Positioning: Balancing Short-Term Gains and Long-Term Resilience

The key to leveraging LAX's traffic surge lies in strategic portfolio diversification. In the short term, airlines with robust LAX operations and REITs with proximity to the airport's infrastructure projects offer high-growth potential. However, long-term positioning requires a focus on structural trends: the airport's capital improvement programs, its role in global trade, and its ability to adapt to shifting travel patterns.

Investors should prioritize assets that align with LAX's trajectory as a premier hub. This includes not only airlines but also REITs with exposure to logistics corridors and transit-oriented developments. By doing so, portfolios can capitalize on immediate demand spikes while remaining resilient to cyclical fluctuations in the travel sector.

Conclusion

LAX's passenger traffic surge is more than a statistical anomaly-it is a testament to the airport's strategic importance in a post-pandemic world. For investors, the challenge is to harness this momentum without overexposing portfolios to volatility. By targeting airlines that optimize LAX's demand drivers and REITs that benefit from its infrastructure-driven premiumization, investors can achieve a balance of short-term returns and long-term stability. As LAX continues its evolution into a global economic powerhouse, those who act decisively today will reap the rewards for years to come.