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U.S. Airline Stocks Grapple with Rising Fuel Costs

U.S. airline stocks are encountering turbulence in the face of surging fuel prices and a post-summer lull. Citi analysts have recently revised down earnings estimates and price targets for several major carriers, including Delta Air Lines (NYSE:DAL), United Airlines Holdings (NASDAQ:UAL), Southwest Airlines (NYSE:LUV), and American Airlines (NASDAQ:AAL) Group.

Delta and United Maintain Buy Ratings On U.S. Airlines

Despite these adjustments, Delta and United Airlines still maintain their Buy ratings from Citi analysts. These companies’ resilience stems from their strong international presence and robust co-branded card spending. U.S. airline stocks face challenges as fuel costs rise and summer demand wanes. Citi analysts revise forecasts for major carriers, while a prolonged period of difficulty looms

Southwest and American Airlines Receive Neutral Ratings

In contrast, Southwest and American Airlines have received Neutral ratings from Citi. Southwest grapples with operational challenges and disputes over pilot compensation, while American Airlines faces high capital expenditure expectations.

A temporary yet persistent “mismatch” characterized by high oil prices, weakening economies, and a robust dollar is predicted to persist until 2024. In response, airlines have trimmed their guidance ahead of Q3 earnings reports.

Read More: Oil Prices Drop Over $1 on Demand Concerns as Saudi Arabia Confirms Year-End Cut

Market-Wide Impact

The challenges extend beyond individual airlines, affecting the broader market. The U.S. Airline Global Jets ETF has substantially declined as the industry braces itself for ongoing difficulties.

Facing a Period of Turbulence

U.S. airline stocks are clearly navigating a challenging period, marked by soaring fuel costs and reduced summer demand. Citi’s predictions suggest that this difficulty may endure until 2024, signifying a prolonged test for the industry.

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Disclaimer: Please note that this article serves solely for informational purposes. Thus, must not construe as financial advice. We advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.


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