Deutsche Bank Initiates Coverage on 14 Airlines, Many With Buy Ratings (AMR, LUV, UAUA, DAL, CAL)

Deutsche Bank analysts Michael Linenberg and Richa Talwar have initiated coverage on 14 airlines.

AirTran Holdings, Inc (NYSE: AAI) $5.82
Rating: Buy
Price target: $7.00
"AirTran Holding’s share price has been range-bound for the past nine months as investors have taken a cautious view toward its growing network outside of its primary Atlanta hub. However, we think the shares are poised to break-out with the return of earnings and margin growth driven by an improving macro backdrop."

Allegiant Travel Co. (NASDAQ: ALGT) $50.32
Rating: Buy
Price target: $61.00
"Since going public in December 2006, Allegiant Travel Company has reported the industry’s highest profit margin regardless of the economic backdrop (March quarter 2010 operating margin of 21.4% was 3x better than the runner-up). So far, the company has been profitable for 28 consecutive quarters, a track-record that very few airlines can claim over the same timeframe."

Alaska Air Group (NYSE: ALK) $50.86
Rating: Buy
Price target: $70.00
"Alaska Air Group, Inc., Alaska Air Group, Inc., in our opinion, is a gem of a company, which, because it lacks a national footprint like some of its larger competitors, has yet to be discovered by investors. Of course, airline investors are well aware of its industry-leading margins, high quality product, solid management team, healthy cash position, and enviable oil hedge position."

AMR (American Airlines) (NYSE: AMR) $8.26
Rating: Buy
Price target: $14.00
"year-to-date 2010 which we think is a function of its lagging margin performance. However, we think several initiatives announced by the company will narrow the margin gap between AMR and its competitors as well as provide a catalyst for the share price to catch-up."

Continental Airlines (NYSE: CAL) $23.57
Rating: Buy
Price target: $34.00
"Since announcing the agreement to merge with United on May 3, 2010, Continental Airline’s shares have been tied to United’s share price reflecting the structure of the transaction which envisions Continental shareholders receiving 1.05 shares of UAUA common for each CAL share. In our opinion, we believe there is a very high probability that the deal is approved and both carriers are aiming to close the transaction before year end 2010."

Delta (NYSE: DAL) $13.45
Rating: Buy
Price target: $17.00
"The merger of Delta Air Lines and Northwest Airlines which was consummated in Oct. 2008 is off to a solid start as evidenced by: 1) synergy targets ($2 billion
steady state over three years) being achieved (and in some cases being exceeded) resulting in some of the industry’s best margins, 2) relative labor peace although
union representation not fully sorted out, & 3) effective use of size as a means to improve economics of partner relationships & attract new business"

Hawaiian (NYSE: HA) $6.83
Rating: Buy
Price target: $11.00
"Hawaiian recently was awarded the rights to serve Tokyo’s close-in Haneda Airport from Honolulu – one of only four daily flight authorities granted by the Japanese to US airlines. This market will be a nice addition, in our view, to the company’s growing long-haul network which includes service to American Samoa, Australia, the Philippines, and Tahiti."

JetBlue (NASDAQ: JBLU) $6.50
Rating: Buy
Price target: $8.00
"After a relatively strong 2009 earnings performance was overshadowed by a Mar Q 2010 loss (driven by several one-off events), we think JetBlue's shares are ready for take-off as an improving fundamental backdrop should drive earnings growth and margin expansion particularly as we move into 2H 2010."

Pinnacle (NASDAQ: PNCL) $5.30
Rating: Buy
Price target: $8.50
"Pinnacle Airlines Corp., like most airlines, should benefit from an economic recovery, particularly since their major carrier partners (Delta, Continental, United
and US Airways) are enjoying some semblance of stability, which, at the very least, should translate into diminished partner risk."

Republic (NASDAQ: RJET) $6.09
Rating: Hold
Price target: $6.50
"Hold-rated Republic Airways is neither a regional airline nor a low cost carrier but a hybrid with a revenue base that would put it in the category of a major airline (2010 sales estimated to top $2.7 billion). Republic, in our view, faces significant execution risk as it works to integrate and merge two separate airlines that it acquired in 2009"

SkyWest (NASDAQ: SKYW) $$13.35
Rating: Hold
Price target: $14.00
"SkyWest, Inc., like other high quality regional airlines, should benefit from an economic recovery, particularly since its major carrier partners (Delta and United) are enjoying some semblance of stability, which, at the very least, should translate into diminished partner risk. However, several near and medium-term concerns are likely to keep the stock range-bound for the time being."

Southwest (NYSE: LUV) $12.07
Rating: Buy
Price target: $15.00
"We rate Southwest Airlines Co. a Buy as it has one of the best balance sheets in the industry, one of the lowest cost structures, has a culture among its workforce that is legendary, is a consistently profitable airline year in and year out, and a strong competitor."

United (NASDAQ: UAUA) $22.78
Rating: Buy
Price target: $33.00
"UAL Corporation is arguably the most exposed to the revenue segments which took the biggest hit in the global recession: 1) long-haul international, 2) business/premium travel, and 3) cargo. As those segments recover with the global economy, UAUA's shares should be among the best performing of the major airlines."

US Airways (NYSE: LCC) $9.9.
Rating: Buy
Price target: $14.00
"For US Airways in 2010, we are anticipating the return of profits. As one of the stocks that has been overshadowed by larger, more widely-held, major airlines, US Airways shares, in our opinion, could see significant upside over the next 12 months as the improving economy becomes a catalyst for investors to return to the name."

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