US airline stocks face turbulence amid soaring fuel costs

U.S. airline stocks are currently grappling with the challenges of rising fuel costs and a post-summer slump, with Citi analysts recently lowering earnings estimates and price targets for several major airlines. Delta Air Lines (NYSE:), United Airlines Holdings (NASDAQ:), Southwest Airlines (NYSE:), and American Airlines (NASDAQ:) Group have all seen their financial forecasts revised downwards.

Despite these revisions, Delta and United continue to hold Buy ratings from the Citi analysts. The strength of these two companies lies in their international exposure and solid co-branded card spend. On the other hand, Southwest and American Airlines are rated as Neutral by Citi. Southwest is currently wrestling with operational improvements and disputes over pilot pay, while American is dealing with high capital expenditure expectations.

A temporary but enduring “mismatch” of high oil prices, weakening economies, and a robust dollar is predicted to last until 2024. This challenging environment has led to airlines cutting their guidance ahead of Q3 earnings reports.

In addition to individual airlines, the broader market has also been affected. The U.S. Global Jets ETF has experienced a significant drop as the industry braces itself for the ongoing challenges.

It is clear that U.S. airline stocks are facing a period of turbulence as they navigate high fuel costs and a post-summer slowdown in demand. The predictions from Citi suggest that this could be a prolonged period of difficulty for the industry, with potential impacts lasting until 2024.

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