UBS has reduced price targets and trimmed its 2026 earnings estimates for multiple U.S. carriers as jet fuel prices climbed in early March, but the investment bank also signaled that recent share price weakness might be bringing the sector closer to a low.
The brokerage expects several airlines to preannounce first-quarter results early this week and said most carriers are likely to steer market expectations toward the midpoint of their prior forecasts.
Fuel costs spiked in early March, but airlines typically retain about two weeks of fuel inventory. UBS noted that means the higher prices should affect roughly half of the quarter, which could limit the hit to first-quarter earnings.
At the same time, carriers reported solid demand through the quarter, a trend that could support revenue per available seat mile, or RASM. Nevertheless, the unpredictability of fuel prices has prompted many airlines to suspend full-year 2026 guidance.
UBS outlined company-level nuances in its revisions. It said United Airlines could find some offset to fuel pressure in higher revenue and potentially lower labor expenses because the carrier has not finalized a flight attendant contract. Those dynamics may help blunt higher fuel costs.
For Delta Air Lines and Alaska Air Group, UBS expects first-quarter earnings to land near the midpoint of their guidance ranges. By contrast, American Airlines, which the brokerage characterizes as having greater sensitivity to fuel, could report earnings closer to the lower end of its outlook.
Across the sector, UBS lowered 2026 profit expectations. It revised Delta's 2026 earnings to $5.85 a share from $7.17 and cut the price target to $83 from $87. United's 2026 estimate was reduced to $10.22 from $13.56 and its target price trimmed to $134 from $147. American Airlines experienced one of the largest adjustments, with UBS lowering its 2026 earnings estimate to $0.43 from $2.21 because of the carrier's higher exposure to fuel.
Shares of U.S. airlines have sold off sharply in recent weeks, with declines since late February ranging between about 17% and 30%. UBS pointed out the scale of the pullback is similar to the selloff seen in early 2022 when fuel prices surged after the start of the Russia-Ukraine war.
UBS said the magnitude of the share declines could indicate the group is approaching a bottom, but it also warned of clear downside risks if fuel prices continue to rise or if higher inflation prompts consumers to cut back on travel.
Clear summary
UBS cut price targets and 2026 earnings forecasts for several U.S. airlines after jet fuel rose in early March. While higher fuel will only partially affect first-quarter results because carriers carry about two weeks of fuel, airlines face profit pressure and many have suspended full-year guidance. Firm-level factors such as pending labor contracts and demand trends may offset some costs for certain carriers, but the sector has already posted sharp share declines.
Key points
- UBS lowered 2026 earnings and price targets for multiple carriers, citing higher jet fuel costs.
- Higher fuel should impact roughly half of the first quarter because airlines typically hold about two weeks of fuel inventory, and demand remained solid through the period supporting RASM.
- Recent share declines of approximately 17% to 30% since late February may signal the sector is nearing a bottom, though downside risks remain.
Risks and uncertainties
- Persistent or rising jet fuel prices could further compress airline earnings - this affects airline profitability and related markets such as aviation suppliers and travel services.
- Higher overall inflation could reduce consumer travel demand, weighing on revenues for carriers and touching the broader leisure and business travel sectors.
- Labor negotiations and contract status remain an offset variable; unresolved agreements could change cost dynamics for specific carriers.