Leskinen Michael D. sold $1.3M of UAL

Redburn upgraded Southwest Airlines (LUV) to Neutral, raising its price target to $40. The firm cited valuation improvements and stronger-than-expected ancillary revenue growth. Redburn maintains Buy ratings on Delta (DAL) and United (UAL), favoring their international networks and capacity discipline. Institutional interest increased for all three carriers, with Southwest having the highest short interest.

American, United, and Southwest Airlines are reducing flight capacity due to a surge in jet fuel costs, which is expected to add $1B to American's Q4 fuel expenses. The airlines are evaluating less profitable routes, potentially leading to fewer flight options and higher fares for travelers. Fuel prices have risen due to geopolitical tensions, with the global average jet fuel price increasing by 7.4% to $194.90/bbl.

Redburn reiterated Buy ratings on Delta (DAL) and United (UAL), upgrading Southwest (LUV) to Neutral, citing strong demand and unit revenue growth. The firm raised jet fuel cost forecasts but expects 2027 earnings to exceed consensus for DAL and UAL, with target prices of $105 and $150, respectively. LUV's target is $40.

Rothschild & Co raised price targets for American Airlines (AAL) to $13.50, Delta Air Lines (DAL) to $105, and lowered United Airlines (UAL) to $150, citing strong domestic revenue trends. The firm expects capacity constraints and premium demand to support unit revenues. The FAA is deploying a new AI-powered air-traffic system, Smart, developed by Air Space Intelligence.

US diesel prices reached a record $6.40 per gallon, an 88% increase in 9 months. United Airlines announced flight cuts through 2027 due to rising jet fuel costs. Retail sales declined in July. According to AAA, the average gas price is $4.44 per gallon. American Airlines also warned of reduced capacity in Q4.

United Airlines and American Airlines may cut capacity in Q4 due to high fuel costs. American estimates $1B in extra fuel costs for Q4, while United forecasts $6B for 2026. Both airlines plan adjustments to maximize profitability. Brent crude is up 70% this year, squeezing airline margins. American has cut guidance twice this year.