UBS lowered the firm's price target on American Airlines (AAL) to $14 from $15 and keeps a Buy rating on the shares. Jet fuel prices have risen toward $5/gallon on the Gulf Coast, prompting a preference for higher-quality airlines like Delta Air Lines (DAL) and United Airlines (UAL) with stronger margins, while carriers with idiosyncratic demand drivers like Southwest Airlines (LUV) may also fare relatively well, the analyst tells investors in a research note. Despite March RASM gains largely driven by favorable demand-supply conditions, elevated fuel costs are expected to weigh on Q2 earnings, even as fare increases contribute more to revenue, the firm says.
