United US Airways, American Airlines boosted on optimism and positive JP Morgan forecast

All US carriers stocks surged on Thursday (10-Sep-09), following optimistic advice from analysts at JP Morgan stating now is the time to buy airline stocks. As a result, the AMEX Airlines Index (6.7%) rallied, its highest gain since Jan-2009, despite an increase in oil prices (0.9%), to USD71.94. The Dow (+0.8%) rose, although not as substantially. Meanwhile, only three carriers, WestJet, TAM and GOL PERCENTAGES? ended trading down.

According to JP Morgan, US carriers’ cash levels are currently at a size where Chapter 11 bankruptcy filings are unlikely to occur during Winter 2009-10. Furthermore, the analysts forecast demand will “bounce along” until Jan-2010, after which a gradual recovery in the economy in 2010 will lead to increased demand.  In terms of revenues, JP Morgan forecast a 20% decrease in US carrier revenues in Oct-2009, followed by declines of 10% and 12% in Nov-2009 and Dec-2009, respectively. However, the analysts expect revenues to increase 5.5% in 2010.

US Airways (+17.8%) led the rally, as a result of JP Morgan upgrading their rating of the carrier’s stocks from “underweight” to “overweight”. The carrier was followed by US Airways (+12.3%), which was also upgraded, from “underweight” to “neutral”. American Airlines (11.5%), which also surged, meanwhile remained at “overweight”.

However, LCCs JetBlue (+2.2%) and AirTran (+0.6%) were downgraded from “overweight” to “neutral”, forecasting the aforementioned legacy carriers will have more success in 2010.

Fellow legacy carrier, Delta Air Lines (+10.5%) also rose, despite Barclays Capital’s widening of its 3Q2009 forecast loss to USD0.25 a share from its previous forecast of USD0.05 a share, due to fuel costs, the global financial downturn and the swine flu outbreak. However, the analysts agreed with JP Morgan’s forecast that the economy will start to recover in 2010, which will allow Delta’s stock’s  to improve next year. Delta ended trading at USD8.10, its highest price in seven months.

WestJet (-4.4%) stocks meanwhile fell, following its announcement that it plans to raise up to CAD172.5 million (USD160 million) in fresh capital. Brazilian carriers, TAM (-0.6%) and GOL (-0.3%) also slipped, despite a rise in the Bovespa (+1.1%).

North & South America selected airlines daily share price movements (% change): 10-Sep-09