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Deutsche Bank sees value in US airlines, upgrades Alaska, JetBlue and Southwest

Published 02/20/2024, 06:56 PM
Updated 02/20/2024, 06:56 PM
© Reuters. - The U.S. airlines sector now deserves a more positive view, according to Deutsche Bank, as most carriers have moderated their growth plans, reducing the pressure on over-supplied domestic markets.

Depressed earnings and operating cash flow, or, in some cases, negative operating cash flow, are not supportive of the industry’s more robust capital expenditure plans, the German bank said, in a note dated Feb. 20, forcing the carriers to scale back their growth aspirations.

The bank now expects domestic capacity growth to be about 4.5% in the first half of 2024, around half of what it was anticipating four months ago. 

“We believe more moderate domestic ASM (available seat mile) growth for 2024 will have positive implications for domestic unit revenue performance, and by extension, should translate into solid top-line performance for the domestic-focused names,” Deutsche said. 

As a result, the bank has upgraded its investment stance on Alaska Air (NYSE:ALK), JetBlue (NASDAQ:JBLU) and Southwest (NYSE:LUV) all to ‘buy’ from ‘hold’. 

It also reiterated ‘buy’ ratings on American (NASDAQ:AAL), Delta (NYSE:DAL) and United (NASDAQ:UAL), “as we believe the major carriers with their vast domestic networks should also benefit from a more balanced domestic supply backdrop.”


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