Goldman Sachs took the step of downgrading SkyWest to Neutral from Buy in a note released on Thursday, and simultaneously reduced its price target on the regional carrier to $108 from $126. The bank attributed the move to an elevated risk that SkyWest's block hour production will fall short of previous expectations and to the view that the company's upside is more limited compared with the broader airline industry's improving backdrop.
Analyst Catherine O'Brien highlighted differences in SkyWest's revenue mix, noting that long-term capacity purchase agreements with partner carriers are expected to account for 81% of the company's revenue in 2025. In O'Brien's assessment, that structure "produces more durable results than the rest of our US Airlines coverage over the cycle, but offers significantly less upside to the improving competitive/fare environment."
As part of the reassessment, Goldman trimmed its forecast for SkyWest's 2026 block hour growth to 3.0% from a prior 3.5%. The note explained this revision by saying partner airline capacity growth is expected to "remain lower than originally planned over the medium-term."
O'Brien described the revised block hour outlook as "a significant deceleration from recent years," when SkyWest experienced mid-teens growth amid a post-pandemic ramp in utilization and the addition of dual-class E175 aircraft to its fleet.
The downgrade of SkyWest occurred even as Goldman maintained a constructive stance on the airline industry overall. The firm raised its industry net income forecasts for the third and fourth quarters of 2026 by 24% and 32%, respectively, citing stronger unit revenue trends and a notable decline in jet fuel prices.
Clear summary
Goldman Sachs lowered SkyWest to Neutral and cut its price target to $108, pointing to increased downside risk to block hour production and limited upside because of SkyWest's contract-heavy revenue model, while simultaneously raising industry-level profit forecasts for later 2026 due to better unit revenue trends and lower jet fuel costs.
Key points
- Goldman Sachs downgraded SkyWest from Buy to Neutral and reduced the price target to $108 from $126.
- The bank lowered its 2026 block hour growth forecast for SkyWest to 3.0% from 3.5%, citing partner airline capacity growth that will remain below earlier plans over the medium-term.
- Goldman expects 81% of SkyWest's 2025 revenue to come from long-term capacity purchase agreements, a structure that offers steadier results but less participation in an improving fare environment.
Risks and uncertainties
- Block hour production may underperform targets - this directly affects regional carriers and could influence airline capacity planning and regional service levels.
- Partner airlines keeping capacity growth lower than previously planned - this uncertainty impacts regional carriers dependent on capacity purchase agreements and could influence regional fleet utilization.
- Limited upside from contractual revenue mix - sectors tied to regional air travel and airline supply chains may see constrained benefits if fare environments improve but contract structures limit carrier participation.