Is United Airlines (UAL) a Buy Amidst a Weak Airline Sector?

The airline industry in 2025 remains a study in contrasts: modest profitability improvements amid persistent headwinds like economic uncertainty and geopolitical tensions. For investors, the question of whether United Airlines (UAL) is a compelling buy hinges on its valuation appeal, earnings momentum, and ability to navigate sector-specific challenges.

Valuation Appeal: A Discounted but Cautious Opportunity

United Airlines currently trades at a trailing P/E ratio of 9.39 and an EV/EBITDA of 5.7x–6.1x according to fullratio.com, significantly below the airline industry's average EV/EBITDA of 7.47x per NYU Stern data. These metrics suggest UAL is undervalued relative to peers, particularly when compared to the broader Industrials sector's P/E of 25.64 according to fullratio.com. However, the discount reflects lingering concerns about the sector's fragility. For context, the International Air Transport Association (IATA) projects the industry's 2025 net profit margin at 3.7%, while United's pre-tax margin of 8.2% in Q2 2025 reported in earnings and 9.2% in Q3 per IBA analysis outperforms this benchmark. This margin expansion, driven by premium product offerings and cost efficiencies, positions UAL as a relative outperformer.

Yet, the valuation discount is not without justification. United's net leverage of 2.0x per Yahoo Finance and rising labor costs 33% of operating expenses highlight structural risks. Delta Air Lines, for instance, maintains a stronger balance sheet with $15.6 billion in net debt versus United's $20.8 billion according to IBA analysis, underscoring the latter's higher financial vulnerability.

Earnings Momentum: Strong Beats, Mixed Signals

United's Q3 2025 results underscored its earnings resilience. The company reported an EPS of $2.78, exceeding both guidance ($2.25–$2.75) and the $2.67 consensus estimate per Investing.com transcript, while maintaining an 8% pre-tax margin per Yahoo Finance. However, revenue of $15.2 billion fell short of the $15.33 billion forecast according to Investing.com transcript, signaling demand pressures. The stock's 9.09% post-earnings decline in after-hours trading according to Investing.com transcript suggests market skepticism about sustainability.

Management's guidance for Q4 2025-$3.00–$3.50 EPS and record revenue according to Yahoo Finance-and full-year EPS toward the upper end of the $9–$11 range per Yahoo Finance provide optimism. Strategic investments in premium cabins (e.g., Polaris Studio Suite per Yahoo Finance) and brand-loyal customer retention are key drivers of margin expansion. Yet, rising non-fuel unit costs up 4% in Q3 and weak North American demand contrasting with European and Asian outperformance temper enthusiasm.

Industry Headwinds: A Fragile Recovery

The airline sector's 2025 outlook is cautiously optimistic but far from robust. IATA forecasts net profits of $36 billion, up from $32.4 billion in 2024, supported by falling jet fuel prices ($86/barrel in 2025 vs. $99 in 2024 per IATA data). However, regional disparities persist: North American carriers face a 1.7% margin decline according to Oliver Wyman analysis, while full-service carriers (FSCs) outperform low-cost carriers (LCCs) with 10.4% vs. 1.9% operating margins according to IBA analysis. United's 9.2% Q3 margin reported in earnings is competitive but lags Delta's 10.1% according to IBA analysis, reflecting Delta's tighter cost control.

Geopolitical tensions and economic volatility further cloud the outlook. For example, Q2 2025 results showed mixed regional performances according to Oliver Wyman analysis, and United's exposure to high-cost labor markets (e.g., U.S. hubs) amplifies its vulnerability to wage inflation.

Conclusion: A Buy for the Patient Investor

United Airlines' valuation metrics and margin expansion make it an attractive candidate for long-term investors willing to navigate sector volatility. Its strategic focus on premium offerings and customer loyalty aligns with industry trends toward yield resilience. However, the stock's post-earnings sell-off and structural challenges-rising debt, cost pressures-warrant caution.

For UAL to justify its valuation premium, it must sustain margin growth while addressing cost inefficiencies. Investors should monitor Q4 results and management's progress on debt reduction. In a sector where FSCs like United are outperforming LCCs according to IBA analysis, UAL's ability to balance innovation with fiscal discipline will determine its long-term appeal.