UBS upgrades these 2 U.S. airline stocks

Investing.com -- UBS upgraded shares of Delta Air Lines (NYSE:DAL) and United Airlines to Buy from Neutral in a note on Monday. 

The bank cited stronger international and premium travel demand, improved revenue expectations, and a stabilizing economic outlook.

“We are upgrading DAL and UAL from Neutral to Buy,” UBS analysts wrote. The decision follows “recent tariff relief due to the 90-day agreement with China and framework with the U.K.,” which has shifted the firm’s base case from a potential downturn to “stability / slow growth.”

UBS said recent commentary from the airlines, including a May 6 meeting with Delta, suggests “stability in demand in April and May.” 

The firm also highlighted fare data showing a year-over-year improvement of 410 basis points for Delta and 180 basis points for United in April. 

UBS expects total revenue per available seat mile (TRASM) pressure to ease from negative 3%–4% in the second quarter to just negative 1% in the second half of 2025, with TRASM growth of 3% in 2026.

UBS raised its 2025 earnings estimates for Delta from $5.05 to $5.64 per share and lifted its price target to $66, up from $46. For United, the 2025 EPS estimate rose from $9.43 to $10.64 per share, with a price target increase to $105 from $67.

The recovery in U.S. equities is also said to alleviate earlier concerns about demand for higher-end travel. 

“The broader picture of rising wealth is supportive for growth in premium / international,” UBS wrote, noting average U.S. household wealth rose from $1.08 million in late 2019 to $1.44 million at the end of 2024.

UBS concluded that the “more favorable revenue backdrop is a key lever for EPS and upside for DAL and UAL.”