Airlines face significant cuts in price targets amid economic concerns
- UBS has downgraded price targets for Delta Air Lines and United Airlines by 45% each and Alaska Airlines by 28%.
- This adjustment coincides with declining consumer sentiment and a sharp drop in financial markets.
- The airline industry is facing significant challenges, indicating a potential recession may intensify existing headwinds.
On Monday, April 7, 2025, UBS announced a significant reduction in the price targets for major airline stocks as economic concerns deepen. This price adjustment reflects a 45% decrease for both Delta Air Lines and United Airlines, with Alaska Airlines experiencing a 28% decline in its price target. The actions taken by UBS come as consumer sentiment continues to deteriorate and the financial markets show further volatility. Initial indicators suggest that the airline sector is bracing for challenging times as discretionary spending lowers in the U.S., and travel demand wanes particularly from international markets. Moreover, Susquehanna Financial Group has lowered its target on United Airlines by 31%, reducing the forecast for fiscal years 2025 and 2026 amid concerns about the U.S. travel demand. Observing these trends, Jefferies analysts also downgraded American, Delta, and Southwest Airlines, citing disappointing consumer sentiment and the subsequent impact on bookings. The Dow Jones U.S. Airlines Index has already reflected a sharp decline, falling 16% since new tariffs announced by President Donald Trump, totaling an overall year-to-date drop of 35%. Furthermore, key executives within various airline companies are expected to address the dwindling demand during upcoming earnings calls. Investors are particularly interested in hearing forecasts about summer travel demand to gauge how these companies plan to navigate the anticipated economic downturn. The anticipated decline in travel demand arises not only from consumers cutting back on discretionary spending but also from international factors affecting travel patterns, such as tariffs and geopolitical issues. Overall, the airlines are in a precarious position as they deal with external economic pressures and lower domestic demand. Analysts are urging for clearer communication about future travel demand to avoid further undermining investor confidence. As the summer season approaches, guidance from airline executives will be crucial in shaping market reactions and investor sentiment moving forward.