Airline Stocks Slip as Analyst Cuts Sector Estimates, Regulators Showing Opposition to Consolidation (CAL, UAUA)

June 30, 2009 11:49 AM EDT
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Despite crude oil which is down about 2% and approaching the $70 level today, airline stocks are under heavy pressure as a FTN Equity analyst has reduced estimates for the entire group.

The analyst attributes his revised sector forecast to "lower-than-expected unit revenue and higher jet fuel prices", as well as expectations that the "legacy carriers" will see losses for FY09. FTN moved its Q2 and FY09 unit revenue estimates from 15% and 12% to 17% and 13%, respectively. The analyst also raised his jet fuel costs estimate from $75 per barrel to $85 per barrel equivalent.

On a somewhat less-pessimistic note, the analyst said, "While the network airlines are forecast to report large losses in 2009, they have the financial and operating leverage to produce substantial earnings surprises when the economy recovers in 2010."

Also affecting the airline stocks today, U.S. regulators are showing heavy opposition to Continental and the Star Alliance group of carriers' request to grant broad antitrust immunity aimed at aiding consolidating in the sector. Such a deal could create "spillover" issues related to a closer relationship between Continental and United, as a WSJ article points out.

Around the sector:
  • Delta Air (NYSE: DAL) down 1.6%
  • AMR Corp. (NYSE: AMR) down 5.4%
  • JetBlue (Nasdaq: JBLU) down 3%
  • Continental Airlines (NYSE: CAL) down 3.9%
  • UAL Corp. (Nasdaq: UAUA) down 8.4%

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