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Merrill Lowers Frontier Airlines to 'Neutral'

Merrill Lynch downgraded Frontier Airlines (FRNT) to "neutral," from "buy."

Analyst Michael Linenberg says Frontier rival United Airlines announced on Friday that its new low-fare carrier, Ted, won't charge more than $309 for a walk-up purchase on a non-stop flight (one way) to and from Denver. This cap almost matches Frontier's new $299 price cap on walk-up fares.

Linenberg notes United's walk-up fares will only be available in eight markets starting Feb. 12. (Frontier flies to 37 cities from Denver.) Still, he's concerned United could expand these lower fares to significantly more Denver markets.

Given that all of Frontier's revenue are tied to the Denver market, he now sees to his current fiscal 2005 (Mar.) forecast for Frontier. Linenberg sees 70 cents fiscal 2004 earnings per share, and $1.00 in fiscal 2005.

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