Key Takeaways
- President Trump’s recent comments indicated the Iran conflict may continue longer than anticipated, triggering selloffs in airline stocks.
- Since the beginning of the U.S. and Israel-led military engagement with Iran, jet fuel costs have skyrocketed approximately 70%.
- Southwest (LUV) and United Airlines (UAL) ranked among the S&P 500’s biggest losers during Thursday’s trading session.
- Analysts at TD Cowen slashed price targets for multiple airline companies, pointing to sustained high fuel expenses and weakening consumer travel patterns.
- While reducing UAL’s price target from $140 to $120 and LUV’s from $56 to $46, TD Cowen maintained Buy recommendations for both carriers.
Major airline stocks experienced significant losses Thursday following President Trump’s recent statements about the ongoing Iran conflict, which suggested the military engagement would last longer than Wall Street had anticipated. Investors had been counting on a rapid conclusion to hostilities, which would have brought much-needed relief from elevated fuel expenses. Those expectations quickly dissolved.
Shares of United Airlines (UAL) declined 3.2% while Southwest Airlines (LUV) retreated 2.3%, positioning both carriers among the day’s weakest performers on the S&P 500, which registered a modest 0.2% loss.
United Airlines Holdings, Inc., UAL
Delta Air Lines (DAL) slid 1.4%, JetBlue (JBLU) fell 1.8%, and American Airlines dropped 3.8%. The U.S. Global JETS ETF declined 2%.
During Wednesday’s address, Trump stated the Iran war is “nearing completion” while emphasizing that “we must honor the dead by completing the mission.” Investors interpreted the subtext clearly: a swift resolution remains unlikely.
The cost of jet fuel has jumped approximately 70% since military operations involving the U.S. and Israel against Iran commenced. The U.S. Gulf Coast Kerosene-Type Jet Fuel Spot price reached $4.344 per gallon on March 20 — its highest level since May 2022. Prior to the conflict’s February 27 start date, prices stood at $2.428 per gallon.
Such dramatic price increases create severe profitability challenges for airline operators.
Wall Street Firm Reduces Airline Sector Price Targets
Tom Fitzgerald, an analyst at TD Cowen, reduced price objectives for multiple airlines Thursday. He cited the probability of sustained elevated energy costs and slowing credit card spending trends as justification for more conservative projections.
“We lower our estimates for the big 6 U.S. airlines with fuel looking likely to remain elevated vs. antebellum prices for the remainder of 2026,” Fitzgerald wrote.
The firm decreased its United Airlines price target from $140 to $120 while retaining its Buy rating. TD Cowen characterizes Delta as the sector’s most defensive positioning currently, though United remains their preferred long-term investment opportunity.
Regarding Southwest, TD Cowen reduced its price objective from $56 to $46 while also maintaining a Buy recommendation. The analyst noted that their Southwest profit projections now fall below the broader market consensus as the company approaches its Q1 earnings report.
Fitzgerald emphasized that carriers with “higher leverage levels and/or greater fuel sensitivity” confront the most challenging near-term operating environment. He specifically identified American Airlines, JetBlue, and Alaska Air Group as the most vulnerable to current conditions.
Southwest Faces Headwinds Entering Earnings Season
Southwest enters the upcoming earnings period facing considerable challenges. TD Cowen’s earnings estimates, which fall short of consensus expectations, coupled with indicators of weakening demand and climbing operational costs, create a complex scenario for the carrier.
Southwest shares have declined 7.1% year-to-date, with average daily trading volume exceeding 10 million shares. The company’s market capitalization currently stands at $18.78 billion.
Despite lowering price targets, TD Cowen maintained Buy ratings on both UAL and LUV, indicating the firm views current weakness as temporary rather than fundamental. Fitzgerald observed that “further volatility” might generate “attractive buying opportunities” for United.
As airlines prepare to report Q1 earnings, the U.S. Gulf Coast jet fuel spot price continues hovering near multi-year peak levels.
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