By Senad Karaahmetovic
Argus analyst John Staszak cut the rating on United Airlines (NASDAQ:UAL) to Hold from Buy after the most recent developments concerning flight cancellations.
In June, United said it will cut 50 daily flights from Newark Liberty International Airport so it could focus on on-time arrivals.
The downgrade call reflects flight cancellations, pilot shortages, higher fuel prices, as well as lowered EPS estimates.
“We expect UAL to turn profitable in the second quarter and remain so over the rest of the year, driven by strong demand for international flights and a recovery in corporate travel. However, we expect demand for leisure travel in the U.S. to level off as the economy weakens and consumer confidence wanes. As UAL and other airlines expand their fleets, passenger revenue is likely to decline somewhat,” Staszak told clients in a note.
The long-term rating remains Buy on “expectations for an ongoing recovery in corporate demand and a strong recovery in cross-Atlantic flights.”
Elsewhere today, Exane BNP Paribas analyst James Hollins cut the rating on United Airlines to Underperform from Neutral with a $33 per share price target.