Key Takeaways
- President Trump’s recent address indicated the Iran conflict may continue longer than Wall Street anticipated, triggering airline stock declines.
- Aviation fuel prices have skyrocketed approximately 70% since the commencement of the U.S. and Israel-led conflict with Iran.
- Southwest Airlines (LUV) and United Airlines (UAL) ranked among the S&P 500’s biggest losers.
- TD Cowen slashed price projections for multiple airline carriers, pointing to persistent fuel expenses and weakening travel demand.
- United’s price target was reduced to $120 from $140, while Southwest’s dropped to $46 from $56, though both retained Buy ratings from TD Cowen.
Airline sector equities experienced significant downward pressure Thursday following President Trump’s commentary on the Iran situation, which eliminated market expectations for a rapid conclusion. Investors had anticipated a prompt end to hostilities — along with the accompanying decrease in fuel expenses. Those expectations quickly dissolved.
United Airlines (UAL) declined 3.2% while Southwest Airlines (LUV) retreated 2.3%, positioning both carriers among the S&P 500’s poorest performers, even as the broader index slipped only 0.2%.
United Airlines Holdings, Inc., UAL
Delta Air Lines (DAL) slipped 1.4%, JetBlue (JBLU) descended 1.8%, and American Airlines tumbled 3.8%. The U.S. Global JETS ETF registered a 2% decline.
In Wednesday remarks, Trump declared the Iran war is “nearing completion” while emphasizing that “we must honor the dead by completing the mission.” Investors interpreted the subtext: a swift resolution remains unlikely.
Aviation fuel costs have climbed approximately 70% since the initiation of the U.S. and Israel-led conflict with Iran. 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, the price stood at $2.428 per gallon.
Such dramatic price increases create severe profitability challenges for airline operators.
Analyst Downgrades Target Prices Throughout Airline Industry
TD Cowen’s Tom Fitzgerald reduced price targets for multiple carriers Thursday. His rationale centered on expectations for extended elevated energy costs and declining credit card expenditure trends that warrant more conservative forecasts.
“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 stated.
For United Airlines, TD Cowen reduced its price objective to $120 from $140 while maintaining its Buy recommendation. The firm considers Delta the most defensive investment currently but continues viewing United as the strongest long-term opportunity.
Regarding Southwest, TD Cowen decreased its target to $46 from $56 while keeping its Buy rating intact. The firm acknowledged its Southwest projections now trail broader Wall Street consensus as Q1 earnings approach.
Fitzgerald highlighted that carriers with “higher leverage levels and/or greater fuel sensitivity” confront the most challenging near-term environment. He specifically identified American Airlines, JetBlue, and Alaska Air Group as most vulnerable.
Southwest Faces Headwinds as Analyst Estimates Trail Consensus
Southwest approaches earnings season in a challenging position. TD Cowen’s below-consensus projections, coupled with weakening demand indicators and escalating expenses, establish a low threshold — but also heightened risk.
Southwest has fallen 7.1% year-to-date, with average daily trading volume exceeding 10 million shares. The carrier’s market capitalization stands at $18.78 billion.
Notwithstanding the target reductions, 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” may generate “attractive buying opportunities” in United shares.
The U.S. Gulf Coast jet fuel spot price continues hovering near multi-year peaks as the industry’s Q1 earnings season approaches.
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