Investing.com -- Wolfe Research updated its airline sector outlook on Wednesday, raising second-quarter earnings estimates for Southwest Airlines and United Airlines above consensus while lowering projections for other carriers following Delta Air Lines' recent report.

The research firm noted that airline demand and pricing remained strong throughout the second quarter as jet fuel prices declined. Delta reported last week and provided guidance for further revenue acceleration in the third quarter compared to the second quarter.

Wolfe Research expects similar results from most airlines this quarter. The firm's third-quarter earnings estimates now sit below consensus for all carriers due to a recent spike in jet fuel prices linked to renewed tensions with Iran. The largest downside to consensus estimates appears for Allegiant Travel, Frontier Group Holdings, and American Airlines.

The firm's third-quarter revenue assumptions generally exceed consensus, with accelerating revenue per available seat mile. United Airlines, JetBlue Airways, and Alaska Air Group show the most revenue upside potential relative to consensus in the third quarter.

Wolfe Research observed that the industry's revenue performance has exceeded initial expectations despite fuel price increases. The firm suggested this indicates airlines face less exposure to fuel shocks than previously thought.

Looking ahead to 2027, Wolfe Research expressed growing optimism that airline revenue per available seat mile will remain positive. The firm's estimates for next year stand most above consensus for United Airlines, Southwest Airlines, and Allegiant Travel. The research firm expects 2027 to show two distinct halves, with strongly positive revenue per available seat mile in the first half and negative readings in the second half.

Allegiant Travel and United Airlines remain the most attractive stocks based on the firm's updated 2027 earnings estimates.