Legacy Airlines Are Ready For Take-Off
Kate DuBose Tomassi, 03.23.06, 8:16 AM ET
Citing stronger-than-expected revenues in the airline industry, Goldman Sachs analyst Glenn Engel raised earnings estimates for AMR, Continental Airlines, US Airways Group and Northwest Airlines.
"Domestic unit revenues in February were double that of international routes," said the analyst. "The relative strength of domestic favors low fare carriers, but the momentum in business travel favors legacy airlines."
Engel said revenue momentum is "particularly powerful" for carriers oriented to domestic service, such as AirTran Holdings (nyse: AAI - news - people ), Midwest Air Group, (amex: MEH - news - people )Southwest Airlines (nyse: LUV - news - people ) and US Airways (nyse: LCC - news - people ).
The analyst raised 2006 and 2007 earnings-per-share estimates on AMR (nyse: AMR - news - people ) to a loss of 50 cents and a profit of $1.85 per share, respectively, from a loss of $1.10 and a profit of $1.35.
He raised his 2006 and 2007 estimates for Continental to $1.70 and $3.55 per share from $1.40 and $3.25, respectively.
For Northwest, the analyst raised his 2006 and 2007 EPS estimates to losses of $3.45 and 50 cents per share from losses of $4.25 and $1.50 per share, respectively.
Finally, for US Airways, the analyst raised his 2006 and 2007 EPS estimates to a profit of 95 cents and $3.75 per share, respectively, from a loss of $1.15 and a profit of $2.
While the analyst believes UAL (otcbb: UALAQ.OB - news - people ) will likewise benefit from improvement in industry fundamentals, he expects its margin momentum to lag behind the sector because of its greater exposure to international and western routes, which he expects to underperform.
Kate DuBose Tomassi, 03.23.06, 8:16 AM ET
Citing stronger-than-expected revenues in the airline industry, Goldman Sachs analyst Glenn Engel raised earnings estimates for AMR, Continental Airlines, US Airways Group and Northwest Airlines.
"Domestic unit revenues in February were double that of international routes," said the analyst. "The relative strength of domestic favors low fare carriers, but the momentum in business travel favors legacy airlines."
Engel said revenue momentum is "particularly powerful" for carriers oriented to domestic service, such as AirTran Holdings (nyse: AAI - news - people ), Midwest Air Group, (amex: MEH - news - people )Southwest Airlines (nyse: LUV - news - people ) and US Airways (nyse: LCC - news - people ).
The analyst raised 2006 and 2007 earnings-per-share estimates on AMR (nyse: AMR - news - people ) to a loss of 50 cents and a profit of $1.85 per share, respectively, from a loss of $1.10 and a profit of $1.35.
He raised his 2006 and 2007 estimates for Continental to $1.70 and $3.55 per share from $1.40 and $3.25, respectively.
For Northwest, the analyst raised his 2006 and 2007 EPS estimates to losses of $3.45 and 50 cents per share from losses of $4.25 and $1.50 per share, respectively.
Finally, for US Airways, the analyst raised his 2006 and 2007 EPS estimates to a profit of 95 cents and $3.75 per share, respectively, from a loss of $1.15 and a profit of $2.
While the analyst believes UAL (otcbb: UALAQ.OB - news - people ) will likewise benefit from improvement in industry fundamentals, he expects its margin momentum to lag behind the sector because of its greater exposure to international and western routes, which he expects to underperform.
