JP Morgan raises target prices for Continental, Delta, Southwest and Allegiant

JP Morgan raises target prices

Analysts at JP Morgan stated during trading that despite recent improvements in US airline stock prices and successful capital raisings, the sector still faces considerable long-term challenges. JP Morgan stated, "raising money has long been this sector's forte, and meaningful upheaval seems to have been averted again, with the industry apparently no closer to generating what we consider to be acceptable returns on capital".

JP Morgan added, "call us cruel and heartless, but had capital spigots remained entirely shut during this downturn, we believe the structural upheaval that may have ensued...might have eventually resulted in a more stable, capital-conscious industry capable of generating adequate returns, sometime in the near future."

Despite this, JP Morgan raised its price targets for Delta Air Lines (shares +2.7%), Allegiant (+1.4%), Continental Airlines (+0.9%) and Southwest Airlines (-0.7%) to the following:

• Continental Airlines: to USD14 from USD12;
• Delta Air Lines: to USD10 from USD9;
• Southwest Airlines: to USD7 from USD6;
• Allegiant: to USD49 from USD46.

The analysts also rate these carriers as "overweight".

Southwest's stock continued to decline ahead of the release of its 3Q2009 financial report. According to Zacks Investment Research, the carrier is expected to post narrow losses for the quarter of USD0.04 a share. The analysts expect non-cash charges in its fuel hedging programme to effect profits, despite improving passenger traffic for the LCC.

Expressjet up on Sep-2009 traffic results

Expressjet (+2.9%) stocks rose the most on Monday, after the carrier announced a 5.5% year-on-year increase in load factor for Sep-2009, to 76.3%, assisted by a 19% improvement in traffic (RPMs), while capacity (ASMs) increased 11%.

North & South America selected airlines daily share price movements (% change): 12-Oct-09

Source: Centre for Asia Pacific Aviation & Yahoo! Finance