UBS upgrades airline stocks amid economic stability

On May 19, 2025, in a notable shift regarding U.S. airlines, UBS increased its ratings for two major airline stocks, Delta Air Lines and United Airlines, from neutral to buy. Analyst Thomas Wadewitz set a price target of $66 per share for Delta, up from $46, suggesting a potential upside of approximately 30% based on recent market movements. For United Airlines, he raised the price target to $105 from $67, indicating an expected upside of 35%. This optimism comes in light of a 90-day tariff agreement between the U.S. and China, which analysts believe bodes well for the U.S. economy's stability and gradual growth. The airline industry, which has faced significant declines recently—Delta’s stock fell 16% and United's 20% in 2025—may be set for recovery due to this increased confidence in demand stability. Analysts expect that both companies can leverage improved international travel and premium revenue, leading to stronger earnings prospects. Furthermore, the increase in the price targets and the positive revisions to earnings outlook stem from an anticipated improvement in total revenue per available seat mile (TRASM), an important performance metric for airlines. UBS now predicts a stronger TRASM in 2025 and subsequent years, underpinning the rationale behind its bullish projections. Many industry analysts share optimism for both Delta and United, with a majority rating them as buys or strong buys, reflecting widespread belief in a rebound for the airlines as investors regain confidence in the sector. This sentiment shift signals a broader market recovery that could benefit airlines moving forward. In parallel, BlackRock's Rick Rieder expressed a cautious yet positive view on bonds, noting a shift towards higher-yield assets as markets stabilized post-tariff-induced volatility. Rieder cited a favorable economic outlook, investing in the B-rated bond segment, acknowledging that while short-term economic pullbacks are possible, the overall health of the U.S. economy remains strong. Rieder also mentioned adding mortgage-backed securities to provide a balance in investment strategy, highlighting the varied landscape that investors are navigating in the wake of recent economic changes. Thus, developments in the airline industry and bond market illustrate the complexities and evolving conditions of the financial landscape in May 2025.