Although still in recovery, airlines have observed a steady rise in demand in the post-pandemic era. In fact, 2022 produced record-high revenues for several U.S. carriers.

Pent-up flight demand is expected to continue this year, but heightened labor, rent, and airport costs could impair profitability. Let's compare the two promising airline stocks to determine which makes a better buy in today's market. 

The case for Sun Country Airlines

Reporting record revenue for the year, Sun Country Airlines (SNCY 0.61%) enjoyed accelerating scheduled-service demand throughout 2022. Total revenue per available seat mile (TRASM) for the year surged more than 36%, and capacity grew to the highest level it's been annually since 2018.

Employing a three-pronged strategy of scheduled service, charter, and cargo flights, Sun Country Airlines retains a distinct advantage over some of its competitors. Its unique business model grants Sun Country "the most flexible scheduled service capacity in the industry," according to CEO Jude Bricker.

Capacity in 2022 reached an impressive 83.5%, and Sun Country delivered annual revenue of $894 million, 43.6% higher than in 2021 and a new company record.

And while some carriers struggled during the holiday season, Sun Country Airlines posted a completion factor of 99.6% last December, which management claims is the best in the indsutry. The completion factor refers to the percentage of scheduled flights that reach their destinations as expected.

Sun Country Airlines will continue to face challenges such as higher fuel, labor, maintenance, and airport-related costs this year, but other issues like last year's coronavirus omicron variant outbreak and crew shortages have departed for now. 

Looking ahead, Sun Country expects a solid first quarter, with approximately 80% of planned passenger revenue already booked for the period. Company guidance projects 24% to 28% revenue growth in the first quarter, the Minneapolis-based airline's strongest quarter historically.

The case for Alaska Air Group

Also posting a new annual revenue record last year, Alaska Air Group (ALK 0.83%) enjoyed a full-year operating revenue jump of 56% year over year. 

The SeaTac, Washington-based company posted mixed Q4 earnings results in January, missing on revenue estimates while beating earnings-per-share expectations. Though an 11.3% improvement from the same period in 2019, Alaska Air's fourth-quarter revenues of $2.5 billion ultimately fell short of analyst estimates.

For the year, Alaska Air Group delivered $9.6 billion in operating revenue, the highest annual total in company history. The new annual revenue record also beat 2019's operating revenue by nearly 10% -- on 9% less capacity. 

In other words, with 9% fewer passengers onboard, Alaska Air produced almost 10% more revenue last year than before the pandemic hit. However, even though Alaska Air reported a 7.6% pre-tax operating margin last year, high relative to the industry, returning to historical margin levels has proven difficult.

The main culprits -- labor, fuel, and fleet maintenance costs -- dragged profitability down significantly in 2022. As a result, Alaska Air Group's net income reached $58 million for the year, a mere 12% of the prior year's $478 million. 

Although Alaska Air Group carried in record-high revenue last year, profitability remains a major issue for the airline. Considering the company drove eight times more profit in 2021 than 2022, with 36% less operating revenue, clearly there is work to be done.

Undeterred, Alaska Air Group's management team plans to implement productivity initiatives this year, focusing primarily on historically challenging areas of staffing and aircraft availability. Alaska Air anticipates a return to pre-pandemic capacity levels by mid-year, expects full-year margins to reach 9% to 12% and looks forward to 29% to 32% year-over-year revenue gains. 

Which airline stock is a better buy right now?

To determine which of these airline stocks makes a better investment today, I've compared their price-to-earnings ratios (P/E), year-over-year revenue growth rates, and return on equity (ROE). 

Metric Sun Country Airlines Alaska Air Group
Market cap $1.23 billion $5.88 billion
Price-to-earnings ratio 69.48 100.22
Year-over-year revenue growth 43.57% 56.19%
Return on equity 3.6% 1.5%

Table data: WallStreetZen.

Although Alaska Air Group delivered better year-over-year revenue growth last year, Sun Country Airlines sports a more appealing (lower) P/E ratio and much higher ROE. Used by many investors including Warren Buffett, ROE helps indicate how profitable a company is based on its equity. In other words, ROE provides a measure of profitability from an investor's point of view. While a 20% or higher ROE is considered good, in this case we're looking for the better of the two.  

And Sun Country's well-rounded business model that combines passenger, cargo, and charter-based revenues makes it a more resilient company in the long run.