Delta and other airline stocks fall as an analyst sees 'short-term pain' ahead

Jefferies’ cautionary note comes after airlines put out their own warnings with their recent quarterly earnings

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United Airlines was the only airline Jefferies still recommends as a “buy”
United Airlines was the only airline Jefferies still recommends as a “buy”
Photo: Mario Tama (Getty Images)
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Airline stocks are in for some turbulence, according to global investment bank Jefferies (JEF+1.79%).

The firm issued a report today entitled “The Air Comes Out of Airlines” in which it downgraded American (AAL+2.33%) and Delta (DAL+1.53%) stocks from buy to hold. Air Canada and Southwest (LUV+0.68%) have been downgraded from hold to underperform. Air Canada is especially vulnerable to cross-border tariffs and tensions.

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Jefferies kept United Airlines (UAL+3.24%) as its lone buy recommendation, based mainly on opportunities beyond 2025. Still, it revised its price target downward by 48%.

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The firm blamed the dour outlook for airline stocks on declining consumer and corporate confidence along with fears about tariffs.

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“Consumer sentiment continues to disappoint, now at 4-yr lows, and tariffs take effect this week after delays affecting business confidence,” the report says, adding that “GDP-driven businesses like airlines are in for short-term pain.”

The report and negative outlook sent airline stocks tumbling Tuesday.

Jefferies’ cautionary note comes after airlines put out their own warnings with their recent quarterly earnings.

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Last month, Delta lowered its outlook, citing reduced confidence among consumers and businesses and economic uncertainty. American Airlines and JetBlue (JBLU+4.92%) followed suit in cutting guidance for 2025.

Southwest, meanwhile, unveiled a range of moves to lift revenue, including charging for many checked bags. It also doubled its cost-cutting goal, and now aims to slash expenses by more than $1 billion by 2027.

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—Will Gavin contributed to this article.