Credit Suisse First Boston downgraded the airline sector to market weight from overweight. CS First Boston cut its estimates on Alaska Air (ALK), Northwest Air (NWAC), Southwest Air (LUV), Delta Air (DAL), Continental Air (CAL) and American Airl (AMR).
Analyst James Higgins says the downgrade was based on a triple whammmy of less favorable fundamentals, the risk of war with Iraq and pension funding issues. Higgins says he is cutting his 2002 and 2003 estimates on most of the large airlines that he covers due to lower-than-expected revenues early next year, and higher fuel prices.
He widened his $1 billion third quarter industry loss estimate to a $1.45 billion loss. He says he's also broadly reducing his targets for all major airlines in his universe, driven by the increased conviction that airlines will not see peak earnings per share levels until 2005 vs. his prior 2004 estimate.