Morgan Stanley: Consumer willingness to travel remains resilient, North American aviation industry "attractive"

Morgan Stanley recently released a research report on the North American aviation industry, summarizing key industry developments over the past week, including potential mergers and acquisitions, government long-term strategies, adjustments to loyalty programs, and executive changes, and providing detailed data on capacity, consumer surveys, and individual stock investment ratings. Key Highlights: Potential Industry Consolidation: It has been reported that Spirit Airlines and Frontier Airlines (ULCC.US), which are in bankruptcy protection, are in discussions for a potential merger. Sources say the deal could be announced as early as this month, but neither party has publicly commented. The two companies have been in contact at least since 2022, but have not reached an agreement before. National Strategy Release: The US Department of Transportation (DOT) released the "2026-2036 National Advanced Air Travel Strategy," planning to accelerate the research and deployment of advanced air transport (AAM) technology through coordinated federal, state, local, and tribal government actions. The strategy focuses on safety, security, national defense, and economic competitiveness, setting phased development goals: demonstrating operation of existing airport infrastructure by 2027, nurturing the US domestic supply chain of key technologies such as automation and aviation electronics; expanding urban and rural AAM operations by 2030, promoting private investment in vertical takeoff and landing airport construction and modernizing low-altitude traffic control systems; achieving advanced capabilities such as fully automatic flight by 2035, consolidating the US' leadership in aviation manufacturing and global aviation trade. Loyalty Program Tightening: American Airlines Group Inc. announced that starting mid-December 2025, passengers purchasing basic economy class tickets will no longer accumulate AAdvantage miles and elite qualifying points. This move further restricts its basic economy class product, aligning with competitors like Delta Air Lines, Inc. who have already implemented similar policies. Executive Changes: Delta Air Lines, Inc. President Glen Hauenstein will retire on February 28, 2026, after serving in the company for over 20 years, with significant impact on the company's route planning and business strategy. Joe Esposito, current Senior Vice President, will succeed him. Market and Consumer Insights: According to OAG data, major North American airlines have shown differentiated adjustments in capacity planning for the second quarter of 2026: American Airlines Group Inc. saw a 7.6% year-on-year growth in short-haul international route capacity; United Airlines saw a 9.0% increase in domestic route capacity and a 1.6% increase in short-haul international route capacity; JetBlue Airways Corporation saw an 11.9% increase in short-haul international route capacity and a 12.2% increase in long-haul international route capacity. On consumer demand, AlphaWise survey shows that 58% of consumers plan to travel in the next six months, a slight decrease from 62% in the same period last year but higher than the previous month. Business travel spending willingness ranks first among all types of travel demand, with international travel spending willingness surpassing domestic travel for the first time. Income stratification is evident, with travel willingness reaching 79% for consumers with annual incomes above $150,000, while travel willingness significantly increasing for income groups of $25,000-49,000 and above $100,000, showing resilience in travel demand across income levels. Investment Views and Stock Ratings: Morgan Stanley maintains an "attractive" industry view on the North American aviation industry. The report updates stock ratings, target prices, and risk-return analysis for nine major airlines covered: Alaska Air Group, Inc., American Airlines Group Inc., Delta Air Lines, Inc., United Airlines, Southwest Airlines Co., Sun Country Airlines, receiving "buy" ratings, while Allegiant Travel, Frontier Airlines, JetBlue Airways Corporation, among others, are given "hold" ratings. The report emphasizes that Delta Air Lines, Inc. is favored for its strong balance sheet and leading customer loyalty program; United Airlines excels in execution; and Southwest Airlines Co. will focus on the smooth rollout of its newly designated seating system in 2026.