Key Takeaways
- President Trump’s recent speech indicated the Iran conflict may extend beyond initial market expectations, triggering airline stock declines.
- Jet fuel prices have climbed approximately 70% since the commencement of the U.S. and Israel-led confrontation with Iran.
- United Airlines (UAL) and Southwest (LUV) ranked among the S&P 500’s poorest performers during Thursday’s session.
- TD Cowen reduced price targets throughout the airline industry, pointing to heightened fuel expenses and weakening travel demand.
- TD Cowen adjusted its UAL price target down to $120 (previously $140) and LUV to $46 (previously $56), while maintaining Buy recommendations on both carriers.
Airline shares experienced significant pressure on Thursday following President Trump’s most recent commentary on the Iran war, which eliminated market expectations for a rapid conflict resolution. Investors had anticipated a quick conclusion to hostilities, which would have brought welcome relief from elevated fuel prices. Those hopes dissipated quickly.
United Airlines (UAL) declined 3.2% while Southwest Airlines (LUV) dropped 2.3%, positioning both carriers among the S&P 500’s weakest performers during a session where the broader index fell merely 0.2%.
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 his message as confirmation the conflict will continue for an extended period.
Jet fuel prices have climbed approximately 70% since the beginning of the U.S. and Israel-led military engagement with Iran. The U.S. Gulf Coast Kerosene-Type Jet Fuel Spot price reached $4.344 per gallon on March 20 — representing the highest level since May 2022. Prior to the conflict’s start on Feb. 27, the price stood at $2.428 per gallon.
Such dramatic price increases create severe profitability challenges for airline operators.
TD Cowen Slashes Price Targets Industry-Wide
TD Cowen analyst Tom Fitzgerald reduced price targets throughout the airline sector on Thursday. He cited the probability of sustained high energy costs and declining credit card spending trends as justification for lowering 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 wrote.
TD Cowen reduced its United Airlines price target to $120 from $140, while retaining a Buy rating. The firm considers Delta the most defensive option currently, though United remains their preferred long-term pick.
Regarding Southwest, TD Cowen lowered its price target to $46 from $56, also keeping a Buy rating. The firm acknowledged its Southwest earnings projections now fall below broader market consensus ahead of Q1 earnings.
Fitzgerald highlighted that airlines carrying “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 having the greatest exposure.
Southwest Faces Headwinds with Below-Consensus Estimates
Southwest approaches earnings season facing a challenging environment. TD Cowen’s below-consensus projections, coupled with weakening demand indicators and climbing costs, establish a lowered bar that still carries considerable risk.
Southwest has declined 7.1% year-to-date, averaging more than 10 million shares in daily trading volume. The carrier’s market capitalization stands at $18.78 billion.
Despite reducing price targets, TD Cowen maintained Buy ratings on both UAL and LUV, indicating the firm views current weakness as cyclical in nature rather than structural. Fitzgerald observed that “further volatility” may generate “attractive buying opportunities” in United.
The U.S. Gulf Coast jet fuel spot price continues trading near multi-year highs as the sector enters Q1 earnings season.
