Continental Airlines gains on analyst upgrade; GOL and TAM down with Bovespa

North and South American carriers’ stocks soared on Monday (12-Apr-2010) boosted by the Dow (+0.1%), which ended the session on an 18-month high, breaking through the 11,000 barrier for the first time since late Sept-2008.

The market was up on anticipation of the start of the reporting season and news of funding support for Greece. Airline stocks were also boosted by an analyst upgrade for Continental. The AMEX Airline Index finished trading up 2.4% as a result.

Continental Airlines gains on analyst upgrade

Continental Airlines (+7.0%) shares soared after Stifel Nicolaus & Co upgraded the carrier’s shares from ‘Hold’ to ‘Buy’. According to analyst, Hunter Keay, Continental could make a bid on United Airlines (+4.7%), which is reportedly currently in merger negotiations with US Airways (+4.1%). Mr Keay stated Continental has wanted to merge with United for quite some time, but has “felt no sense of urgency to do so”. Reports of a potential United and US Airways merger may force Continental to act quickly.

The carrier may also make the bid to protect its immunised JV, according to Mr Keay. He added he believes a merger between United and US Airways would be the least desirable option for United. GimmieCredit bond analyst, Vicki Bryan, agreed Continental would be a better option for United. Continental and United were previously in merger negotiations in 2008.

Expressjet reports improved traffic

ExpressJet (+1.5%) also gained, after reporting a 22.6% year-on-year increase in passenger traffic (RPMs) for Mar-2010, on a 17% increase in capacity (ASMs). As a result, load factor improved by 3.5 ppts, to 79.4%. The carrier also expanded its fleet by 7.5% in the month, to 230 aircraft.

US carriers see improved Airline Quality Ratings

US carriers also gained on the release of the Airline Quality Rating report, which revealed that, for the second consecutive year, the performance of the leading US carriers improved in 2009, for the third best overall score in the 20 years researchers have tracked the performance of airlines.

See related report: US airline service quality survey rises. But what’s behind the numbers?

Brazilian carriers down with Bovespa

Elsewhere, FedEx (-0.5%) was the only carrier to decline. GOL was flat and TAM (+0.1%) gained only marginally after the Brazilian Bovespa fell (-1.1%) for a second consecutive day. The index gained 0.4% last week and is up 3.5% so far this year.

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North & South America selected airlines daily share price movements (% change): 12-Apr-2010