Raymond James implemented two rating changes in the U.S. airline sector ahead of second-quarter earnings, moving Delta Air Lines down one notch from Strong Buy to Outperform and lowering JetBlue Airways to Underperform from Market Perform.
In a client note, analyst Savanthi Syth said Delta still ranks as "a top pick for long-term investors," pointing to structural advantages versus network peers, a robust balance sheet and a balanced approach to capital deployment. Syth highlighted the carrier's recent 15% dividend increase as part of that capital-allocation mix. At the same time, she said the recent run-up in Delta shares and a somewhat narrower near-term upside in valuation justified the change in rating.
The action on JetBlue was more guarded. Raymond James noted that JetBlue, together with Frontier, stands to be a primary beneficiary of Spirit's recent demise. However, the firm emphasized that JetBlue's equity is constrained by an approximate $6.12 conversion price on its outstanding convertible debt, a factor that limits upside for current shareholders.
On the question of near-term liquidity, Raymond James does not expect JetBlue to face funding shortfalls in 2026 unless broader macro conditions deteriorate further. Nonetheless, the firm suggested that a more prudent method for addressing JetBlue's capital structure would be a Chapter 11 restructuring - an outcome the firm described as unattractive for existing equity holders.
Beyond company-specific views, Raymond James revised its jet fuel outlook lower for the second through fourth quarters of 2026. The firm said this reflects a steeper retreat from the peak driven by the Middle East conflict than was observed during the 2022 Russia-Ukraine episode. Even so, Raymond James described demand and pricing trends as strong: U.S. average second-quarter close-in fares rose 29.1% year-on-year, while leisure fares increased 36.1%.
The firm noted that its forecasts assume crude prices remaining above the forward curve, and it warned of downside risk to those projections if demand weakens or if industry discipline on capacity erodes.