JPMorgan slashed ratings on the key stocks airline companies yesterday and the stocks fell like a rock. Jet Fuel has increased 39% in the last 6 months, so it's time to short the industry and long the few stocks that will survive.
JPMorgan analyst Jaime Baker cut his ratings on seven major airline stocks, blaming uncertainty over the outcome of the proposed Delta-Northwest Airlines combination and forecasting major losses amid fears of a recession.
The industry may be redeemed if oil prices fall, he said, but he called that outcome unlikely.
"More likely, in our view, is that oil sits tight but revenue trends reverse," he said in a note. "Even a best-ever recessionary demand scenario results in a $4 billion industry loss."
American Airlines parent AMR Corp., Northwest Airlines Corp., Alaska Air Group Inc., US Airways Group Inc. and United Airlines parent UAL Corp. were all downgraded from "Overweight" to "Underweight."
Yesterday Northwest Airlines Corp. was among the sector's biggest decliners, dropping $1.17, or 9.6 percent, to $11.06. Alaska Air Group Inc. also fell sharply, falling $2.99, or 13.3 percent, to $19.51. No. 1 carrier AMR lost 89 cents, or 8.3 percent, to $9.78.
Baker also downgraded Continental Airlines Inc. and Delta Air Lines Inc. from "Overweight" to "Neutral." His ratings for low-cost carriers, such as Southwest Airlines Co. and AirTran Holdings Inc., remained unchanged.
Southwest, which Baker rates "Neutral," said Tuesday it suspended three employees and hired an expert to review maintenance procedures after the company was accused of flying planes that missed key safety inspections.
Here are the top 20 Airline stocks by market cap, happy trading.
| Companies 1 - 20 of about 27 in Airline |
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| Ryanair Holdings plc (ADR) |
28.88 |
-0.01 |
-0.03 |
8.64B |
11.34 |
3,428.61 |
664.11 |
| Southwest Airlines Co. |
11.70 |
+0.21 |
1.83 |
8.61B |
13.94 |
9,861.00 |
645.00 |
| Lan Airlines S.A. (ADR) |
13.75 |
-0.05 |
-0.36 |
4.66B |
14.91 |
3,033.96 |
209.73 |
| China Southern Airlines Limited (ADR) |
41.08 |
-2.56 |
-5.87 |
3.59B |
22.82 |
6,506.84 |
30.41 |
| Gol Linhas Aereas Inteligentes SA (ADR) |
15.20 |
-0.39 |
-2.50 |
3.07B |
49.35 |
2,937.48 |
60.98 |
| Delta Air Lines, Inc. |
10.52 |
+0.39 |
3.85 |
3.07B |
1.96 |
19,154.00 |
1,612.00 |
| UAL Corporation |
24.05 |
-0.24 |
-0.99 |
2.86B |
10.91 |
20,143.00 |
393.00 |
| China Eastern Airlines Corp. Ltd. (ADR) |
51.19 |
+1.42 |
2.85 |
2.49B |
N/A |
5,277.79 |
-515.40 |
| AMR Corporation |
9.93 |
+0.62 |
6.66 |
2.48B |
5.81 |
22,935.00 |
504.00 |
| Northwest Airlines Corporation |
9.86 |
-0.39 |
-3.80 |
2.33B |
1.71 |
12,528.00 |
2,093.00 |
| Continental Airlines, Inc. |
21.45 |
+0.99 |
4.84 |
2.11B |
5.36 |
14,232.00 |
459.00 |
| Copa Holdings, S.A. |
33.43 |
+0.40 |
1.21 |
1.44B |
9.06 |
1,027.26 |
160.41 |
| SkyWest, Inc. |
21.21 |
+0.73 |
3.56 |
1.29B |
8.52 |
3,374.33 |
159.19 |
| Atlas Air Worldwide Holdings, Inc. |
53.72 |
+0.86 |
1.63 |
1.16B |
8.73 |
1,562.71 |
132.42 |
| JetBlue Airways Corporation |
4.79 |
+0.03 |
0.63 |
1.07B |
52.62 |
2,842.00 |
18.00 |
| TAM S.A. (ADR) |
17.95 |
-0.86 |
-4.57 |
1.07B |
3.46 |
4,306.87 |
475.22 |
| US Airways Group, Inc. |
8.76 |
-0.26 |
-2.88 |
804.77M |
2.05 |
11,700.00 |
427.00 |
| Republic Airways Holdings Inc. |
20.23 |
+0.47 |
2.38 |
733.98M |
9.93 |
1,292.68 |
82.76 |
| Alaska Air Group, Inc. |
18.60 |
+0.24 |
1.31 |
707.74M |
6.15 |
3,506.00 |
125.00 |
| AirTran Holdings, Inc. |
6.11 |
0.00 |
0.00 |
561.49M |
11.88 |
2,309.98 |
52.68 |
