US AIRLINES OUTLOOK DROPPED

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By TESTCustomwebLP TESTCustomwebLP April 12, 2011 08:52

US AIRLINES OUTLOOK DROPPED

Rising fuel prices has caused leading analysts to cut earnings estimates for a number of airlines. Recommendations for JetBlue Airways and AMR, American Airlines parent company, were downgraded from hold to sell, and moved a number of others from buy to hold.

Analysts have projected that US airlines 2011 profits will total $1.53 billion, which is down from $2.48 billion before the revisions caused by fuel costs. However all airlines except AMR are still expected to earn a profit in 2011.

Wrote Becker wrote in her report: “The current $3.41/gallon price does not bode well for airline margins for at least 2Q11, and most likely 3Q11 as well. We believe higher average ticket prices are covering a portion of the cost increase, but not the total increase, and as a result, we believe 2011 estimates are too high. In an environment of higher energy prices, we believe it will be difficult for airline company equities to outperform the market. Higher average ticket prices will likely cause demand destruction, and although we expect capacity airlines to reduce capacity to offset reduced demand, we are concerned that their 2H11 reductions will be insufficient.”

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By TESTCustomwebLP TESTCustomwebLP April 12, 2011 08:52
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