Rothschild Downgrades American Airlines (AAL) to Neutral, Due To Higher Oil Prices

American Airlines Group Inc. (NASDAQ:AAL) is one of the 15 Most Undervalued NASDAQ Stocks to Buy According to Wall Street Analyst.

Rothschild & Co Redburn, on March 5, downgraded its call on American Airlines to a Neutral (from Buy), with a $12.50 target price. The firm cited the US-Iran war, which will add “disruptive pressures and material fuel cost inflation,” as the main reason for this rating downgrade.

Note that Goldman Sachs, on March 4, already increased its Q2 Brent crude oil price forecasts by ~15% to $76 per barrel (vs. the initial forecast of $66 per barrel). The firm also warned that a prolonged war and closure of the Strait of Hormuz could send oil prices flying to ~$100 per barrel.

“If Hormuz volumes were to remain flat for 5 additional ‌weeks, ⁠Brent prices would likely reach $100, a level associated with larger demand destruction to prevent inventories from falling to critically low levels.”

For context, AAL’s fuel expenses in 2025 were equivalent to roughly 20% of its revenue. Therefore, a ~15% increase in average oil prices to ~$76 per barrel would reduce AAL’s operating margins by 3 percentage points, assuming AAL does not increase its prices. A ~52% increase in average oil prices to ~$100 per barrel (which would be the case in a prolonged closure of the Strait of Hormuz) would reduce AAL’s operating margins by 10 percentage points.

American Airlines Group Inc. (NASDAQ:AAL), through its subsidiaries, offers passenger and cargo air transportation services in the United States, Latin America, the Atlantic, and the Pacific. The company is headquartered in Fort Worth, Texas, and was established on December 9, 2013, through a merger.

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