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The resurgence of COVID-19 cases due to the rapid spread of the Delta variant has led to the resumption of restrictive measures in several parts of the world. This could dampen the airline industry’s recovery in the near-term. However, increasing vaccinations and the full FDA approval of Pfizer Inc. (PFE) and BioNTech SE’s (BNTX) COVID-19 vaccine should help the industry recover over time.

The Transportation Security Administration (TSA) reported a significant number of screenings during the Labor Day weekend due to leisure travel. Also, according to a ReportLinker report, the global airlines market is expected to reach $744 billion by 2026.

So, we think it could be wise to add relatively stronger airline stocks, Delta Air Lines, Inc. (DAL) and Spirit Airlines, Inc. (SAVE), to one’s watchlist now. Wall Street analysts expect these two stocks to rally by more than 40% in price in the coming months.

Delta Air Lines, Inc. (DAL)

DAL operates through approximately 1,100 aircraft and provides scheduled air transportation for passengers and cargo internationally. The Atlanta, Ga.-based company operates through two segments: Airline and Refinery. It sells its tickets through various distribution channels, such as reservations, online travel agencies, and traditional brick and mortar locations.

On May 3, DAL announced its partnership with Sabre Corporation (SABR) to launch new products, such as its New Airline Storefront. Jeff Lobl, DAL’s managing director of global distribution, said, “We are grateful to Sabre for their innovative and pioneering spirit in taking this journey with Delta and establishing a new and exciting path forward for third-party distribution.”

DAL’s total operating revenue increased 385.4% year-over-year to $7.13 billion in the second quarter, ended June 30, 2021. Its operating income came in at $816 million, versus a $4.82 billion operating loss. Its net income came in at $652 million compared to a $5.72 billion net loss in the prior-year period. Also, its EPS was $1.02, versus a loss per share of $9.01 in the year-ago period.

Analysts expect DAL’s revenue and EPS to increase 43.5% and 224.6%, respectively, year-over-year, to $41.27 billion and $4.31 in its fiscal year 2022. The stock has gained 27% in price over the past year and has been recently trading at around $39.89. Wall Street analysts expect the stock to hit $57.00 in the near-term, which indicates a potential 41.3% upside.

Spirit Airlines, Inc. (SAVE)

Airline services provider SAVE serves 78 destinations in 16 countries in the United States, Latin America, and the Caribbean. In addition, it offers tickets through its call centers, airport ticket counters, spirit.com, and various third parties.

On July 28, 2021, SAVE announced Nov. 17 as a proposed launch date for its new services at the newly established Palmerola International Airport. John Kirby, Vice President of Network Planning at SAVE, said, “Our new air service to the Tegucigalpa area provides convenient nonstop travel options for both Honduras tourism and our Guests looking to visit family and friends.”

For the fiscal second quarter, ended June 30, 2021, SAVE’s operating revenues increased 520.3% year-over-year to $859.31 million. Its operating income came in at $93.21 million, compared to $190.38 million operating loss in the year-ago period. The company’s adjusted EBITDA came in at $62.10 million, compared to a loss of $273.2 million in the prior year period.

SAVE’s revenue is expected to be $4.83 billion in its fiscal year 2022, representing a 43.3% year-over-year rise. The company’s EPS is expected to increase 143.2% year-over-year to $1.55 in the next year. Over the past year, the stock has gained 41.1% and has been recently trading at around $24.79. Wall Street analysts expect the stock’s price to hit $37.78 in the near-term, which indicates a potential 49.8% upside.

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