UPDATE: Jefferies Upgrades American Airlines (AAL) to Hold as Best Positioned Airline for 2 Reasons
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Jefferies analyst Sheila Kahyaoglu upgraded American Airlines (NASDAQ: AAL) from Underperform to Hold with a price target of $25.00 (from $15.00) after exploring 2023 bull cases for airlines. The analyst we raised the 2023 EPS estimate by 2% to $2.10 from $2.05, accounting for higher yields (+$1.20), with some offset from the increase in fuel prices (-$1.15). AAL is believed to be the best positioned of the network carriers to outperform through the recovery due to the younger fleet at 10.8 years than peers at ~15 years and strong network positioning as a sole operator of 37% of routes vs 25% for peers.
The analyst stated "strong network positioning continues to drive considerable potential to outperform peers as the sole operator on 37% of its routes, which compares to 29% for DAL, and 21% for UAL. A sole-operator position allows for significantly greater yield control, with AAL's routes with 2 competing airlines driving yields ~60% below routes that have no competing airlines. In a rising fuel environment, AAL can pass on a greater portion of costs to consumers with less risk of a bad actor competing on price."
Shares of American Airlines closed at $22.91 yesterday.
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