Rothschild & Co Redburn downgraded American Airlines to Neutral from Buy, citing rising jet fuel prices and growing industry capacity as key pressures on the U.S. airline sector. Analyst James Goodall noted that while the industry entered 2026 with improving demand and disciplined supply, geopolitical tensions and higher fuel costs have clouded the outlook.

Goodall explained that the Middle East conflict is expected to raise costs across the sector through fuel inflation, even though U.S. airlines' networks are less exposed to the region than before the 2023 Gaza conflict. The firm cut its earnings forecasts across the sector, with American Airlines facing the steepest impact due to its high sensitivity to fuel prices.

The firm now expects American Airlines to report negative earnings per share this year and slashed its price target to $12.50 from $17. By contrast, Delta Air Lines and United Airlines maintain Buy ratings due to lower fuel sensitivity. Southwest Airlines remains the firm's least favored pick, with execution risks and elevated valuation multiples despite improved revenue expectations.