Goldman Ups Southwest Air Rating, but Cuts AMR

Analyst Glenn Engel sees Southwest as the airline that will suffer the least from rising jet-fuel prices

Goldman Sachs raised its investment opinion on Southwest Airlines (LUV ) to outperform on Thursday, but downgraded American Airlines' parent company AMR (AMR ) to in-line amid fuel-price concerns in the wake of Hurricane Katrina.

Analyst Glenn Engel sees Southwest Airlines as the least impacted among airlines from rising fuel prices and the greatest beneficiary from increased probability of industry consolidation, but sky high fuel prices make it unlikely that AMR can earn enough to support a further rise in its stock price. Engel noted that through July, revenue numbers had been improving faster in the airline industry than oil prices could climb, but he thinks that such surprises are unlikely to continue into the fall.

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