Raymond James Upgrades Allegiant Amidst Fuel Headwinds

Raymond James has revised its financial projections for airlines, significantly increasing its jet fuel price forecast for the latter half of 2026, 2027, and 2028. This adjustment is primarily driven by higher refining margin assumptions rather than crude oil prices. Despite these increasing operational costs, the brokerage firm has upgraded Allegiant Travel to a Strong Buy rating from Outperform, noting the carrier's strong idiosyncratic recovery potential and enhanced scale post-acquisition.

U.S. airline demand remains robust, demonstrating resilience to higher fares and showing encouraging early signs for travel demand after Labor Day. Raymond James has also increased its fourth-quarter U.S. domestic capacity growth forecast, expecting elevated growth from carriers like American and United. In contrast, European intra-Europe fares have been less robust due to increased capacity, though a favorable supply inflection is anticipated for the upcoming winter season.

Latin America continues to show strong demand, particularly on Brazil-North America routes. Similarly, Air Canada reports constructive demand trends extending into the second half of 2026, with a notable strengthening in corporate and premium travel demand beyond the peak summer leisure season. These varied regional dynamics present a complex but generally positive outlook for the airline sector.