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FurloughedTwice
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FurloughedTwice
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NEW YORK (AP) - Another analyst joined the growing chorus of optimism for airline stocks Thursday, as UBS Investment Research initiated coverage on the once moribund industry.
Of the eight airlines Kevin Crissey initiated coverage on, he assigned "Buy" ratings to six. The industry, which has suffered repeated bankruptcies and billions of dollars in losses in recent years, has turned around thanks to improving revenue, he said.
Several airline stocks, though, fell Thursday, as British Airways PLC disclosed U.K. and U.S. agencies are investigating it and other airlines for alleged price-fixing on fares and fuel surcharges. Two other airlines -- Virgin Atlantic and American Airlines -- said they were cooperating with the investigation.
The Amex Airline Index rose by less than 1 percent in midday trading; it has been rising steadily the past few days, reaching its highest point in about a month.
The key reasons for airlines' improving health are simple, Crissey said in a research note: Revenue is increasing with fare hikes, and costs are rising more modestly. Add those two, and airlines get significant profit growth, he said.
To be sure, Crissey said investing in the volatile airline industry long term has rarely been a profitable move. "Trading airline stocks may be hazardous to your wealth," he wrote, saying higher spikes in oil prices could easily wreck his financial models.
He set his models with an assumed price of oil at $69 per barrel through 2007. Oil prices rose 47 cents to $70.80 in midday trading on the New York Mercantile Exchange.
For now, though, he rated Continental Airlines Inc. as his top airline pick. He assigned it a "Buy" rating and a price target of $39, saying it has the best mix of a wide-ranging network, growing capacity and good exposure to business travelers willing to pay higher fares.
Continental shares fell 19 cents to $28.07 in midday trading on the New York Stock Exchange.
His second-ranked airline pick is American Airlines' parent AMR Corp., which got a "Buy" rating and a $35 price target. The world's largest airline has been the most aggressive in wooing business fliers, according to UBS' survey of corporate travel managers, Crissey said.
AMR shares rose 10 cents to $25.72.
Crissey rated AirTran Holdings Inc. a "Buy" with a $19 target. The low-cost carrier has benefited from Delta Air Line Inc.'s reduction in capacity during its stay in Chapter 11 bankruptcy protection and has some of the industry's lowest costs. But the analyst said the carrier still has less brand recognition than many competitors and a narrowly focused route system.
AirTran shares rose 3 cents to $14.51.
United Airlines' parent UAL Corp. received a "Buy" rating and $42 price target. Crissey said the carrier has good exposure to higher-paying business fliers, but its efforts to build a low-fare carrier within itself, called TED, is likely to fail in the future.
UAL shares rose 24 cents to $32.49 on the Nasdaq. Its stock has traded between $26.02 and $43 since they started trading in February following the company's bankruptcy protection emergence.
Crissey rated US Airways Group Inc. as a "Buy" with a $62 price target. The carrier's shuttle flights between the business traveler-rich cities of New York, Boston and Washington will help it drive revenue, he said.
US Airways shares rose 9 cents to $49.03 on the NYSE.
The final airline to get a "Buy" rating from Crissey was Southwest Airlines Co., which enjoys some of the industry's lowest costs. Crissey assigned a price target of $20 for the airline, saying it is operationally strong but it has fewer business fliers than competitors.
Southwest shares fell 6 cents to $16.37.
Crissey assigned a "Neutral" rating and $44 price target for Alaska Air Group Inc., saying it is growing, but it doesn't carry many business travelers and its route structure is narrowly focused on the West Coast.
Alaska Air shares fell 25 cents to $38.77.
Former Wall Street darling JetBlue Airways Corp. received a "Neutral" rating and $13 price target, as Crissey said the company's recent growing pains and financial losses are just a normal part of building an airline.
It already has built a strong brand, but its focus on leisure fliers makes it more difficult to raise fares, Crissey said.
JetBlue shares rose 3 cents to $12.47.
© 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Of the eight airlines Kevin Crissey initiated coverage on, he assigned "Buy" ratings to six. The industry, which has suffered repeated bankruptcies and billions of dollars in losses in recent years, has turned around thanks to improving revenue, he said.
Several airline stocks, though, fell Thursday, as British Airways PLC disclosed U.K. and U.S. agencies are investigating it and other airlines for alleged price-fixing on fares and fuel surcharges. Two other airlines -- Virgin Atlantic and American Airlines -- said they were cooperating with the investigation.
The Amex Airline Index rose by less than 1 percent in midday trading; it has been rising steadily the past few days, reaching its highest point in about a month.
The key reasons for airlines' improving health are simple, Crissey said in a research note: Revenue is increasing with fare hikes, and costs are rising more modestly. Add those two, and airlines get significant profit growth, he said.
To be sure, Crissey said investing in the volatile airline industry long term has rarely been a profitable move. "Trading airline stocks may be hazardous to your wealth," he wrote, saying higher spikes in oil prices could easily wreck his financial models.
He set his models with an assumed price of oil at $69 per barrel through 2007. Oil prices rose 47 cents to $70.80 in midday trading on the New York Mercantile Exchange.
For now, though, he rated Continental Airlines Inc. as his top airline pick. He assigned it a "Buy" rating and a price target of $39, saying it has the best mix of a wide-ranging network, growing capacity and good exposure to business travelers willing to pay higher fares.
Continental shares fell 19 cents to $28.07 in midday trading on the New York Stock Exchange.
His second-ranked airline pick is American Airlines' parent AMR Corp., which got a "Buy" rating and a $35 price target. The world's largest airline has been the most aggressive in wooing business fliers, according to UBS' survey of corporate travel managers, Crissey said.
AMR shares rose 10 cents to $25.72.
Crissey rated AirTran Holdings Inc. a "Buy" with a $19 target. The low-cost carrier has benefited from Delta Air Line Inc.'s reduction in capacity during its stay in Chapter 11 bankruptcy protection and has some of the industry's lowest costs. But the analyst said the carrier still has less brand recognition than many competitors and a narrowly focused route system.
AirTran shares rose 3 cents to $14.51.
United Airlines' parent UAL Corp. received a "Buy" rating and $42 price target. Crissey said the carrier has good exposure to higher-paying business fliers, but its efforts to build a low-fare carrier within itself, called TED, is likely to fail in the future.
UAL shares rose 24 cents to $32.49 on the Nasdaq. Its stock has traded between $26.02 and $43 since they started trading in February following the company's bankruptcy protection emergence.
Crissey rated US Airways Group Inc. as a "Buy" with a $62 price target. The carrier's shuttle flights between the business traveler-rich cities of New York, Boston and Washington will help it drive revenue, he said.
US Airways shares rose 9 cents to $49.03 on the NYSE.
The final airline to get a "Buy" rating from Crissey was Southwest Airlines Co., which enjoys some of the industry's lowest costs. Crissey assigned a price target of $20 for the airline, saying it is operationally strong but it has fewer business fliers than competitors.
Southwest shares fell 6 cents to $16.37.
Crissey assigned a "Neutral" rating and $44 price target for Alaska Air Group Inc., saying it is growing, but it doesn't carry many business travelers and its route structure is narrowly focused on the West Coast.
Alaska Air shares fell 25 cents to $38.77.
Former Wall Street darling JetBlue Airways Corp. received a "Neutral" rating and $13 price target, as Crissey said the company's recent growing pains and financial losses are just a normal part of building an airline.
It already has built a strong brand, but its focus on leisure fliers makes it more difficult to raise fares, Crissey said.
JetBlue shares rose 3 cents to $12.47.
© 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
FurloughedTwice
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