Key Takeaways
- Major airline equities plummeted following President Trump’s address, which indicated the Iran conflict may persist longer than investors anticipated.
- Jet fuel expenses have skyrocketed approximately 70% since the commencement of the U.S. and Israel-led military operations against Iran.
- United Airlines (UAL) and Southwest (LUV) ranked among the S&P 500’s poorest performers during Thursday’s trading session.
- TD Cowen reduced price objectives throughout the airline industry, pointing to inflated fuel expenses and weakening travel demand patterns.
- TD Cowen slashed its UAL price target to $120 (down from $140) and LUV target to $46 (down from $56), while maintaining Buy recommendations on both carriers.
Carrier equities suffered significant losses Thursday following President Trump’s most recent statements regarding the Iran conflict, which extinguished hopes for a rapid resolution. Investors had been anticipating a swift conclusion to hostilities — along with the accompanying relief from fuel price pressures. Those expectations quickly dissolved.
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% decline.
United Airlines Holdings, Inc., UAL
Delta Air Lines (DAL) slipped 1.4%, JetBlue (JBLU) declined 1.8%, and American Airlines retreated 3.8%. The U.S. Global JETS ETF posted a 2% loss.
During Wednesday’s address, Trump declared the Iran war is “nearing completion” while emphasizing “we must honor the dead by completing the mission.” Investors interpreted the subtext: a swift conclusion remains unlikely.
Jet fuel costs have climbed 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 — the highest level recorded since May 2022. Prior to the conflict’s February 27 start date, the price stood at $2.428 per gallon.
Such dramatic price movements create severe profitability challenges for airline operators.
TD Cowen Slashes Price Objectives Industry-Wide
TD Cowen analyst Tom Fitzgerald reduced price targets across airline stocks Thursday. He cited the probability of sustained elevated energy costs and weakening credit card expenditure data 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 stated.
TD Cowen reduced its United Airlines price objective to $120 from $140, while retaining a Buy rating. The firm identifies Delta as the most defensive option currently, though United remains the firm’s preferred long-term investment.
Regarding Southwest, TD Cowen lowered its target to $46 from $56, also preserving a Buy rating. The firm acknowledged its Southwest earnings projections now trail broader market consensus as the company approaches Q1 results.
Fitzgerald highlighted 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 most vulnerable to current conditions.
Southwest Faces Headwinds as Analyst Estimates Trail Consensus
Southwest approaches earnings season from a challenging position. TD Cowen’s below-consensus projections, coupled with softening demand indicators and escalating operational costs, establish a low threshold — but also an uncertain outlook.
Southwest has declined 7.1% year-to-date, with average daily trading volume exceeding 10 million shares. The company’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 cyclical rather than fundamental. Fitzgerald observed that “further volatility” could generate “attractive buying opportunities” for United shares.
The U.S. Gulf Coast jet fuel spot price continues hovering near multi-year peaks as the sector enters Q1 earnings season.
