Investing in ASX airline shares in 2026

Australia's aviation sector has completed its post-pandemic recovery and entered a new phase of sustained growth heading into 2026. Domestic passenger numbers continue to hit near-record highs, with domestic airlines carrying over 5.5 million passengers in October 2025, the second-highest monthly figure recorded since January 2019¹.

International travel is also booming, with international capacity from Australia surpassing 7.1 million departure seats in the first quarter of 2025, reflecting a 6.1% year-on-year increase and exceeding pre-pandemic levels by 2.5%². This is great news for airline companies that saw revenues plunge throughout the pandemic.

So, is now the time to consider adding some airline shares to your portfolio? Let's take a closer look at the sector to see if airline stocks are right for you.

What are ASX airline shares?

Airline shares are a sub-group of travel and tourism shares that trade on the stock market. They represent companies that operate airlines, such as Qantas Airways Limited (ASX: QAN) and Air New Zealand Limited (ASX: AIZ). We also consider airports such as Auckland International Airport Limited (ASX: AIA) alongside airline shares. 

The travel sector is an integral part of a well-functioning economy. However, airlines have historically been hit-and-miss investments. 

Airlines are heavily dependent on economic cycles. In boom times, people have more money to spend on fancy holidays, and business travel increases as companies can afford to splurge on investor roadshows, corporate functions, and other in-person events.

However, when money is tight, the first thing households tend to cut back on is luxury items like holidays. Companies will also reduce their discretionary spending on corporate travel and entertainment. Notably, corporate travel still remains 15–20% below 2019 levels, due to the widespread adoption of hybrid-meeting tools that reduce the need for in-person trips³. As economic activity slows, there is less cross-border deal-making, reducing the demand for corporate travel.

This means airline stocks are typically fair-weather friends to investors. They can deliver substantial gains when times are good but may compound your portfolio's losses when the economy is struggling and share prices are falling.

Why invest in them?

As with all companies, investing in airline shares offers several advantages and disadvantages.

Because airlines are an essential part of the economy, having some exposure to airlines in your portfolio may help unlock additional returns, particularly when the economy is in a healthy growth phase.

However, we know that when black swan events occur – like a global pandemic, for instance – airline shares tend to be among the hardest hit. But it's not just global pandemics investors have to worry about. 

Other impossible-to-predict disastrous events (like plane crashes or terrorist attacks) can also negatively impact the industry. Demand for air travel is likely to decrease following such events, which can dampen profits for airline companies.

Riding the ups and downs of the airline industry

This can make airline shares particularly volatile. For example, in the years before the pandemic, Qantas was an outstanding share to own – surging from $1 back in 2014 to more than $7 by early 2020. However, airline share prices tumbled during the COVID-19 pandemic when governments worldwide restricted international travel to try and curb the spread of the deadly virus.

This can make airline shares particularly volatile. Qantas is a case in point: the Qantas share price hit an all-time high of $12.12 in August 2025, a remarkable turnaround from the depths of the pandemic. However, the good times proved short-lived, with shares selling off sharply in early 2026 as geopolitical tensions in the Middle East escalated and investors reacted to surging oil prices and airspace closures. All these quick ups and downs can be tough on your portfolio, particularly if you find yourself in a position where you need to sell your shares urgently.

Even as tourism resumes in earnest after years of COVID-19 restrictions, other macroeconomic events create headwinds as airlines try to return to profitability. Rising interest rates and soaring inflation dampen consumer spending and confidence, while regional conflicts continue to drive volatility in global oil prices and force airlines to reroute flights around restricted airspace, adding significant fuel burn and operating costs.

Fuel is one of the most significant expenses for airline companies, and higher oil prices are likely to squeeze profit margins just when the industry was hoping to take off.

Top airline shares on the ASX

There are a handful of companies involved in the aviation industry listed on the ASX. These include smaller airlines such as Regional Express Holdings Ltd (ASX: REX) and air charter service Alliance Aviation Services Ltd (ASX: AQZ), and even airports like Auckland Airport. 

Here are three top airline stocks ranked by market capitalisation from highest to lowest.

Qantas

Qantas (ASX: QAN) is Australia's largest airline, with a significant pedigree as one of the oldest airlines still in operation in the world, behind only KLM Royal Dutch Airlines and Colombian airline Avianca.

In FY25, the Qantas Group reported revenue of $23.8 billion and an underlying profit before tax of $2.39 billion, reflecting sustained demand across both domestic and international markets. The strong momentum continued into the first half of FY26, with underlying profit before tax reaching $1.456 billion on revenue of $12.9 billion. Domestic operations delivered an 18% margin, while Qantas Loyalty membership and points activity both set new records.

At the time of writing, the Qantas share price is sitting at $8.37, having pulled back from its all-time high of $12.12 reached in August 2025. Last month, Macquarie Group put an outperform rating and $11.60 price target on Qantas shares, implying potential upside of nearly 40% from current levels.

However, not all analysts are bullish. Many analysts have concerns about the impact of elevated crude oil prices on jet fuel costs over the longer term, as well as the significant capital expenditure required for fleet renewal. As a cyclical stock heavily reliant on consumer and business sentiment, Qantas remains a compelling but complex proposition for investors.

Air New Zealand

New Zealand's flagship carrier Air New Zealand (ASX: AIZ) is among the top airlines in the world in terms of credit ratings. Before the pandemic, it operated more than 3,400 flights per week, transporting more than 17 million passengers every year.

Unfortunately, the airline is currently navigating a difficult period. Air New Zealand has suspended its FY2026 earnings guidance, citing extreme volatility in global jet fuel markets. The airline had already flagged a first-half FY2026 net loss of $59 million, and management has warned that ongoing fuel cost pressures will meaningfully impact second-half results as well.

The core issue is fuel costs. Jet fuel prices have surged from around US$85–90 per barrel to as high as US$150–200 per barrel recently, driven by geopolitical tensions and a widening crack spread. While Air New Zealand is approximately 83% hedged against Brent crude for the remainder of FY2026 — covering an estimated 2.9 million barrels of consumption — the sharp move in prices well above its assumed rate of US$85 per barrel has significantly altered the earnings outlook.

In response, management has implemented initial fare adjustments and flagged further pricing measures, schedule changes, and ongoing cost-saving initiatives if high fuel costs persist. Formal guidance will remain suspended until jet fuel markets and broader operating conditions stabilise.

The market has taken note: over the past 12 months, Air New Zealand shares have declined 29%, significantly underperforming the S&P/ASX 200 Index, which has risen 8% over the same period.

Alliance Aviation

Alliance Aviation (ASX: AQZ) is a leading air charter company operating in Australia and New Zealand. While the company services the tourism, corporate, sporting and government sectors, it earns most of its money from the resources sector, making it Australia's major FIFO ('fly in, fly out') operator, flying resources sector employees in and out of remote mining locations.

Unfortunately, Alliance is going through a particularly difficult period. The share price has fallen more than 50% in 2026 and is currently trading near its lowest level in almost a decade at around 58.5 cents, with market capitalisation shrinking to approximately $94 million.

Recent results highlight the pressures facing the business. Alliance reported a statutory loss of $105.8 million for the first half of FY26, driven by a $164.8 million write-down on its Fokker aircraft fleet and inventory. Management also warned that its wet lease arrangement with Qantas had become commercially unviable. Qantas had previously sought to acquire Alliance in a $611 million deal, but was blocked by the ACCC.

One potential bright spot: Chairman James Jackson recently purchased 50,000 shares on market at 59.8 cents — a move that can signal insider confidence, though it is no guarantee of a turnaround.

What might the future hold for Australian airlines? 

Over the next few years, there are many trends to watch in the Australian airline industry. Geopolitical instability, elevated fuel costs, and aircraft supply constraints from Boeing and Airbus all present meaningful headwinds, even as passenger demand remains strong.

On the infrastructure front, the long-awaited Western Sydney International (Nancy-Bird Walton) Airport is finally becoming a reality. Cargo flights are confirmed to begin in July 2026, with passenger flights to follow in October, with launch partners including Qantas, Jetstar, Singapore Airlines and Air New Zealand. Melbourne Airport is also preparing to construct a third runway, with both projects expected to support long-term growth in passenger and freight capacity.

The corporate travel outlook is also improving. Earlier fears of permanent structural decline appear to be easing — corporate travel budgets are forecast to rise 5% in 2026, and only 8% of travel volume is expected to shift permanently virtual, down from much higher estimates in prior years. That said, business travel may never fully return to pre-pandemic levels.

On the freight side, the structural tailwind from e-commerce remains intact. Global air cargo revenue is forecast to reach $158 billion in 2026, with cargo yields remaining approximately 30% above pre-pandemic levels. This could continue to provide a stable and growing revenue stream for Australian carriers alongside passenger operations.

Pros of investing in ASX airline shares

The sector is recovering: People are travelling again, and airlines are returning to profitability now. Years of pent-up demand and moderating fuel costs have recently seen many airlines upgrade their profit guidances. 

Potential profits: Airline profits are at the mercy of fuel and labour costs. Still, the industry can deliver significant profits to investors when the economy is thriving or oil prices sag. 

And the cons?

Capital intensive: From a balance sheet perspective, airline companies are capital intensive, highly leveraged, and have high operating costs overall. Running an airline is not cheap. 

Recovery may be slow: Just as it looks like we are clear of COVID-19, inflation, war, and rising interest rates have dampened consumer sentiment. Demand for travel may recede as cost-of-living concerns increase. 

Are ASX airline shares a good investment?

Whether airline shares are a good investment for you will depend on your personal risk appetite and investing goals.

The Australian aviation sector offers genuine opportunity — strong passenger demand, a near-duopoly domestic market, and major infrastructure investment all support a positive long-term outlook. However, the risks are real and varied: geopolitical tensions can disrupt routes and spike fuel costs overnight, aircraft supply constraints are limiting growth, and a softening economy could quickly dampen both leisure and corporate travel demand.

Airline and airport shares can perform strongly when the economy is booming and offer diversification benefits in a well-balanced portfolio. But they are inherently cyclical and can be volatile — Qantas itself swung from an all-time high of $12.12 in August 2025 to below $8.50 within months. Investors must be prepared for potentially large swings in value and should consider position sizing accordingly.

As with any investment, you should carefully weigh these factors against your financial goals and risk tolerance before deciding whether ASX airline shares deserve a place in your portfolio.