Although U.S. airline companies are poised for a stronger near-term revenue trend, they face elevated fuel prices, a potential demand softening and capacity growth moderation, according to Raymond James.
Southwest Airlines
Analyst Savanthi Syth upgraded the rating for Southwest Airlines Co (NYSE:LUV) from Outperform to Strong Buy while reducing the price target from $57 to $55.
Southwest Airlines is likely to “retain its position of strength, including a best-in-class balance sheet and cost benefit from a very attractively priced fleet order,” the analyst said in the note.
He added that the company’s relative position could even improve “as current initiatives should enable it to capture a greater share of corporate revenue (relative to 2019 levels), including through up-sell.”
Frontier Group
Syth upgraded the rating for Frontier Group Holdings Inc (NASDAQ:ULCC) from Market Perform to Outperform, while establishing a price target of $14. Frontier Group faces “a longer runway of growth opportunities amidst a potential JetBlue-Spirit merger,” he added.
JetBlue Airways
JetBlue Airway Corporation (NASDAQ:JBLU) will likely be successful in its bid for Spirit Airlines Incorporated (NYSE:SAVE), the Raymond James analyst said.
Alaska Air
Analyst Syth downgraded the rating for Alaska Air Group, Inc. (NYSE:ALK) from Strong Buy to Outperform, while slashing the price target from $75 to $58.
The company faces “potential earnings and operational volatility around exiting the A320 fleet by early 2023,” the analyst wrote.
“While we continue to be constructive on this historically well-managed airline with a relatively unimpaired balance sheet and capital structure, we expect its fleet transition could create elevated cost risk amidst an already tough (industry-wide) operating environment,” he added.
Airline Price Action: Shares of all three airlines were trading lower by 1% to 3% at the time of publication Thursday.
