Analyst downgrades American Airlines to Neutral, favoring Delta Air Lines and United Airlines amid fuel cost pressures

2026-03-06 00:09:42

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Investing.com - Rothschild’s Redburn analyst downgraded American Airlines to Neutral on Thursday in a client report, while maintaining a negative stance on Southwest Airlines and reaffirming a more positive outlook on Delta Air Lines and United Airlines, citing rising fuel prices and capacity growth as the main pressures facing the U.S. airline sector.

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Analyst James Goodall stated that the airline industry looks relatively optimistic entering 2026, supported by improving demand and restrained supply. However, geopolitical developments and rising fuel costs are casting a shadow over the outlook.

“By 2026, the fundamentals for U.S. airlines are positive, with improving demand trends and rational supply dynamics,” Goodall wrote.

The firm noted that the Middle East conflict is expected to increase costs across the sector by pushing up jet fuel prices, though operational disruptions are expected to be limited.

However, “compared to before the Gaza-Israel conflict erupted in 2023, U.S. airline route networks now have less exposure to the Middle East,” the firm added.

Conversely, analysts believe that the main impact will come from fuel inflation, which has led them to cut earnings forecasts.

“This has resulted in a significant downward revision of our forecasts, with the most impact on American Airlines due to its high sensitivity to fuel prices,” the report said.

Rothschild’s Redburn currently expects American Airlines to report a negative EPS this year and has lowered its target price from $17 to $12.50.

In contrast, the firm states that Delta and United are in a more favorable position due to their lower fuel sensitivity. “United and Delta have lower sensitivity, so we maintain a Buy rating,” the analyst wrote.

Southwest Airlines remains the company’s least favored airline, Redburn noted, despite improved revenue expectations, citing execution risks and high valuation multiples.

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