US Airlines "2Q Preview: In-line(ish) 2Q Likely, But Expecting 3Q Guides..."

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US Airlines "2Q Preview: In-line(ish) 2Q Likely, But Expecting 3Q Guides..."

d idiosyncratic drivers should help its top-line near-term. We also

see meaningful earnings upside for UAL driven by revenue momentum and

lower fuel. In addition, its previous FY guidance was conservative in our view,

which leaves room for meaningful upward revisions given checks indicating

that industry demand strength has persisted. We also reiterate our Buy ratings

on DAL, LUV, and ALK and see notable 3Q upside for nearly all airlines.

Revision to our estimates: We raise our 3Q and FY'26/FY'27 estimates to

account for lower fuel as well as persistence of demand strength. Our 3Q

revenue growth YoY estimates are now above 2Q, but we assume a slight

moderation beginning 4Q. Our FY'27 RASM estimates are slightly positive, but

we expect flat to down RASM in 2H'27. Overall, our estimates/price targets

move higher for all airlines under coverage.

Thoughts on the set-ups for various airlines into the print + estimate/PT

revisions

DAL: We model 2Q EPS of $1.38, below BBG cons. of $1.45 (guide $1.00-

$1.50). We think there is potential for CASM-ex headwinds for DAL in 2Q as it

likely raised pay to overcome crew scheduling issues during 2Q (UBSe 7.0%

CASM-ex). Still, fuel is likely to be slightly below $4/gallon (vs. $4.30 guide)

with refinery contributing $0.15-$0.20. For 3Q, we model $2.51 in EPS (BBG

cons. $1.68), which incorporates 13.7% RASM on 0.5% ASMs and 6%

CASM-ex. We also think DAL's non-op costs could be around $200 mm for 2Q

and around -$150 mm lower YoY for FY'26. Our FY'26 EPS estimate is now

$6.70 (cons. $5.52). Our updated FY'27 EPS est. of $9.71 is above cons. of

This report has been prepared by UBS Securities LLC. * Exception to core rating bands; See Required Disclosures section.