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UAL Leads Gains for Airlines After JPMorgan Says Buy
Sept. 10 (Bloomberg) -- United Airlines parent UAL Corp. and US Airways Group Inc. led an index of U.S. carriers to the highest in more than seven months after a JPMorgan Chase & Co. analyst said travel and industry revenue may start rising.
Demand may “bounce along until about January, at which time we do assume gradual improvement begins,” JPMorgan’s Jamie Baker wrote today in a note to clients. Revenue in July and August was “modestly ahead of initial forecasts,” he said.
Baker boosted his rating on Chicago-based UAL to “overweight” from “underweight,” and on US Airways to “neutral” from “underweight.” United is the third-largest U.S. airline by traffic, and US Airways is No. 6.
UAL jumped $1.15, or 18 percent, to $7.60 at 4 p.m. New York time in Nasdaq Stock Market composite trading for the biggest increase in five weeks, and Tempe, Arizona-based US Airways climbed 44 cents, or 12 percent, to $4.02 on the New York Stock Exchange.
All 12 carriers in the Bloomberg U.S. Airlines Index rose, sending the gauge up 7.3 percent to the highest since Jan. 29. The index has tumbled 22 percent this year as the recession crimps corporate travel, the most-profitable business for U.S. airlines.
Industry revenue declined 20 percent or more for May, June and July, according to the Air Transport Association trade group. Continental Airlines Inc. said last week that revenue for each seat flown a mile in August fell 17 percent to 18 percent, the smallest drop in four months.
Revenue Rebound
Baker, who is based in New York, estimates industry revenue will drop by about 20 percent through October, then decline by 10 percent and 12 percent in the final two months of the year. He projects a 5.5 percent increase for 2010.
“We simply cannot ignore recent economic data and growing evidence of global economic improvement,” Baker wrote.
Federal Reserve Bank Presidents Jeffrey Lacker of Richmond, Virginia, and James Bullard of St. Louis said in August that there are signs the recession is ending. The number of Americans filing first-time claims for jobless benefits dropped last week to the lowest level since July, a sign that the labor market’s deterioration is slowing.
Cash levels are “adequate” at UAL, US Airways and American Airlines parent AMR Corp., easing concern that the carriers might face a liquidity crunch, Baker wrote.
“Assuming stable demand and fuel, we now expect winter to pass with nary a bankruptcy in sight,” he wrote. Jet fuel for immediate delivery in New York Harbor is trading at about half what it cost a year earlier.
To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.
Last Updated: September 10, 2009 16:20 EDT
UAL Leads Gains for Airlines After JPMorgan Says Buy
Sept. 10 (Bloomberg) -- United Airlines parent UAL Corp. and US Airways Group Inc. led an index of U.S. carriers to the highest in more than seven months after a JPMorgan Chase & Co. analyst said travel and industry revenue may start rising.
Demand may “bounce along until about January, at which time we do assume gradual improvement begins,” JPMorgan’s Jamie Baker wrote today in a note to clients. Revenue in July and August was “modestly ahead of initial forecasts,” he said.
Baker boosted his rating on Chicago-based UAL to “overweight” from “underweight,” and on US Airways to “neutral” from “underweight.” United is the third-largest U.S. airline by traffic, and US Airways is No. 6.
UAL jumped $1.15, or 18 percent, to $7.60 at 4 p.m. New York time in Nasdaq Stock Market composite trading for the biggest increase in five weeks, and Tempe, Arizona-based US Airways climbed 44 cents, or 12 percent, to $4.02 on the New York Stock Exchange.
All 12 carriers in the Bloomberg U.S. Airlines Index rose, sending the gauge up 7.3 percent to the highest since Jan. 29. The index has tumbled 22 percent this year as the recession crimps corporate travel, the most-profitable business for U.S. airlines.
Industry revenue declined 20 percent or more for May, June and July, according to the Air Transport Association trade group. Continental Airlines Inc. said last week that revenue for each seat flown a mile in August fell 17 percent to 18 percent, the smallest drop in four months.
Revenue Rebound
Baker, who is based in New York, estimates industry revenue will drop by about 20 percent through October, then decline by 10 percent and 12 percent in the final two months of the year. He projects a 5.5 percent increase for 2010.
“We simply cannot ignore recent economic data and growing evidence of global economic improvement,” Baker wrote.
Federal Reserve Bank Presidents Jeffrey Lacker of Richmond, Virginia, and James Bullard of St. Louis said in August that there are signs the recession is ending. The number of Americans filing first-time claims for jobless benefits dropped last week to the lowest level since July, a sign that the labor market’s deterioration is slowing.
Cash levels are “adequate” at UAL, US Airways and American Airlines parent AMR Corp., easing concern that the carriers might face a liquidity crunch, Baker wrote.
“Assuming stable demand and fuel, we now expect winter to pass with nary a bankruptcy in sight,” he wrote. Jet fuel for immediate delivery in New York Harbor is trading at about half what it cost a year earlier.
To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.
Last Updated: September 10, 2009 16:20 EDT
