UBS has revised down its forecasts and price objectives for a group of U.S. airlines, warning investors of "significant uncertainty" tied to fuel costs and the broader outlook for 2026.
In a note published Monday, analyst Atul Maheswari said multiple carriers are likely to preannounce earnings this week, with the early signals indicating first-quarter results will generally fall "towards the mid-point of the guide."
UBS said the spike in fuel prices in early March will only cover roughly 15 days of the quarter, since airlines typically carry about two weeks of fuel inventory. That inventory buffer should limit the direct earnings hit for the quarter, the note said.
Maheswari also noted that carriers have been reporting stronger demand trends, a development that could lift first-quarter revenue per available seat mile - a metric UBS said could produce upside versus current expectations.
Despite that potential, UBS told clients it expects many airlines to suspend full-year guidance for 2026 because of ongoing fuel-price volatility, making it difficult to provide reliable annual projections.
On share-price performance, Maheswari compared the current sell-off to the downturn seen in 2022, when jet fuel last surged at a similar pace. Since late February, he noted, Alaska Airlines and smaller carriers have fallen about 30%. United, American and Southwest are down in the mid-20% range, while Delta has dropped about 17%.
The analyst warned investors to remain alert to the "tail risk of this conflict persisting for longer than expected driving jet fuel even higher." He added that a protracted escalation could rekindle inflationary pressures and cause consumers to reduce travel demand - a potential development he said may not be fully factored into current valuations.
As part of its updated modeling, UBS now assumes jet fuel will average roughly $3 per gallon in the second half of 2026, and applies fuel pass-through rates of between 30% and 50% in its scenario analysis.
The firm adjusted its price targets as follows:
- Delta Air Lines - $82, down from $87
- United Airlines - $134, down from $147
- American Airlines - $15, down from $21
- Southwest Airlines - $59, down from $73
- Alaska Air Group - $60, down from $77
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UBS's revisions reflect the bank's view that fuel-price swings and the risk of a longer-lasting conflict create meaningful uncertainty for airline earnings and guidance, prompting the firm to lower targets and urge caution while carriers reassess full-year 2026 plans.