Rothschild & Co Redburn adjusted its coverage of major U.S. carriers in a client note on Thursday, moving American Airlines to a Neutral rating, retaining a negative view on Southwest Airlines, and reiterating more favorable recommendations on Delta Air Lines and United Airlines. The firm attributed the shifts to upward pressure on jet fuel costs and a rise in capacity across the sector.
Analyst James Goodall said the industry began 2026 from a relatively positive starting point, supported by improving demand dynamics and generally disciplined supply. Nevertheless, he cautioned that recent geopolitical developments, combined with higher fuel prices, have dimmed that outlook.
"Coming into 2026, the underlying backdrop for the US airlines was positive, with improving demand trends and rational supply-side dynamics," Goodall wrote.
Rothschild & Co Redburn noted that the ongoing conflict in the Middle East is expected to lift costs for carriers primarily through higher jet fuel prices, even if operational disruptions remain limited. The firm added that US carriers today are less exposed to the Middle East than they were before the onset of the Israel conflict in Gaza in 2023.
"US airlines’ networks are less exposed to the Middle East today than they were prior to the onset of the Israel conflict in Gaza in 2023," the note said.
The analysts said the principal channel of impact will be fuel inflation, which has forced a downward revision to earnings expectations across their coverage. In particular, the firm signaled that its forecast reductions hit American Airlines hardest because the carrier displays the greatest sensitivity to changes in jet fuel prices.
"This results in material downgrades to our forecasts, which is most acute for American given it has the greatest sensitivity to jet fuel prices," the note said.
Reflecting that vulnerability, Rothschild & Co Redburn now anticipates American will report negative earnings per share for the current year, and it cut the airline's price target to $12.50 from $17. By contrast, Delta and United were described as having lower sensitivity to fuel costs, and the firm continued to rate those carriers as Buyers.
"United and Delta have less sensitivity and, as such, we remain Buyers," the analysts wrote.
Southwest remains the least preferred name in the group for Redburn, with the firm flagging execution risks and relatively high valuation multiples as concerns despite the carrier seeing improved revenue expectations. The note therefore leaves Southwest in a negative position in the firm’s rankings.
Taken together, the note reflects a reassessment of risk across U.S. airlines driven by rising fuel costs and a build in capacity, with the largest impact expected at carriers most exposed to jet fuel price moves.