Barclays_US_HY_Research_High_Yield_Transportation_and_Airlines_Fasten_Seatbelt_Light_Is_On_Initiate_HY_Transportation_at_UW

This document is intended for institutional investors and is not subject to all of theindependence and disclosure standards applicable to debt research reports prepared for retailinvestors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for itsown account and on a discretionary basis on behalf of certain clients. Such trading interestsmay be contrary to the recommendations offered in this report.Please see analyst certifications and important disclosures beginning on page 57.High Yield Transportation and AirlinesFasten Seatbelt Light Is On -Initiate HY Transportation at UWIt's been a smooth ride for HY Airlines since "Liberation Day."But, the makeup of the sector remains higher beta, and wethink this leaves it susceptible to consumer weakness andmacro volatility. UAL is our top OW, JBLU our top UW, AAWW acore MW, and AAL rated MW.Investment OverviewDespite what seems to be a smooth ride right now, the airlines industry remains volatile andfully commoditized, with clear winners and losers. First movers that strengthened balancesheets post-COVID—like UAL—should stay resilient, offering ~30bp upside versus IG peers likeDAL. Conversely, it could get bumpier for the more vulnerable cohort, who are facing mountingrisks; JetBlue 2031 Loyalty Bonds are our top Underweight, with bonds likely retracing to thelow $90s.• We initiate HY Transportation at Underweight. As the parent index of HY Airlines, the sectorcontinues to maintain large exposure to Airlines including JBLU and AAL, which could lead tosome underperformance given their overleveraged balance sheets and higher betacharacteristics.• The airlines industry is highly competitive and commoditized, with clear winners andlosers emerging post-COVID and going forward. • Winners, like UAL, have improved balance sheets and are expected to remain resilient even ifthe economy weakens.• The more vulnerable cohort, especially some low cost carriers (LCCs) and (ULCCs) (eg,JetBlue), face more risk due to overcapacity and higher costs.• Oversupply, especially from low-cost and leisure carriers, is a concern; capacityreductions are likely needed.• Legacy airlines (UAL, DAL) are better positioned for macro uncertainty than in the past.• Airlines with strong loyalty programs and premium offerings are expected to outperform andthe late bloomers are behind the ball.FICC ResearchCredit Research3 November 2025SIGNATUREEdward Brucker, CFA+1 212 526 4435edward.brucker@barclays.comBCI, USAbanikash Rayaji, CFA+1 212 526 9843abanikash.rayaji@barclays.comBCI, USCompleted: 03-Nov-25, 14:51 GMT Released: 03-Nov-25, 15:30 GMTRestricted - ExternalFIGURE 2. HY Airline Sector ConsiderationsSector Level ConsiderationsKey ThemeConsiderationHY TransportationInitiated at Underweight due to heavy airline exposure, higher beta credits, andvulnerability to macro volatility.Legacy Airlines (UAL, DAL)Better positioned due to strong balance sheets, premiumization, and loyalty programs.AAL stands out as weak