American Airlines (AAL) stock plummeted 5.02% in intraday trading on Tuesday, following a downgrade by Jefferies and broader concerns in the airline sector. The sharp decline comes as analysts warn of softening demand and macroeconomic uncertainties affecting the industry.

Jefferies analyst Sheila Kahyaoglu downgraded American Airlines from Buy to Hold and slashed the price target from $20 to $12. The downgrade was part of a broader reassessment of the airline industry, with Delta Air Lines also cut to Hold, while Southwest Airlines and Air Canada were downgraded to Underperform. Kahyaoglu cited expectations of soft corporate and consumer sentiment due to swelling macro uncertainty as the primary reason for the downgrades.

The analyst anticipates that American Airlines, along with Southwest and Air Canada, will likely cut their full-year 2025 earnings guidance. This outlook, combined with concerns about potential spillover of domestic demand weakness into international markets, has created a challenging environment for airline stocks. The sector's vulnerability to economic shocks and recent soft economic data, including disappointing consumer spending figures and inflation concerns, have further exacerbated investor worries. As the industry faces headwinds from potential tariffs and declining consumer confidence, American Airlines and its peers may continue to experience turbulence in the coming months.