Redburn Upgrades Southwest, Maintains Bullish Stance on Delta and United

Redburn has upgraded its rating on Southwest Airlines and reiterated a bullish outlook on network carriers Delta Air Lines and United Airlines, citing a combination of resilient consumer demand and persistent capacity constraints across the industry.

In a research note published Friday, analyst James Goodall raised Southwest (LUV) to Neutral from Sell, establishing a $40 price target. The firm stated its "Sell thesis has now played out" and that the airline's valuation has returned to more reasonable levels.

Analyst Ratings and Price Targets

Redburn maintained its positive stance on major network carriers, keeping its Buy ratings on Delta (DAL) and United (UAL) with price targets of $105 and $150, respectively. The firm's 2027 earnings forecasts for both airlines are ahead of the market consensus.

American Airlines (AAL) was kept at a Neutral rating with a $13.50 target. Redburn cited the carrier's greater sensitivity to fuel-price fluctuations as a reason for its more cautious view.

Key Sector Tailwinds

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Goodall told investors that the sector benefits from a strong backdrop, supported by robust demand for leisure and premium travel that has persisted through the first half of 2026. The firm's positive thesis is built on several key factors:

• Continued consumer acceptance of higher domestic airfares.
• Lingering capacity constraints, driven by an aging short-haul fleet and accelerated aircraft retirements, which limit supply.
• Softer competition from low-cost carriers.

International Strength vs. Fuel Costs

The firm is particularly bullish on the outlook for network carriers, viewing their international operations as a "bright spot." Structural tailwinds, including a global shortage of wide-body aircraft and a growing appetite for long-haul holidays, are expected to support continued unit revenue growth.

Despite the positive outlook, Redburn raised its jet fuel cost forecasts materially above consensus, which it believes presents a downside risk to 2026 earnings for the industry. However, the note argued this headwind is largely priced into airline stocks following recent share price declines.