Merrill Boosts AirTran Rating to 'Buy'

Analyst Michael Linenberg thinks the discount airliner can make money where others can't, aided by lower expenses and more cost-conscious business travelers

Merrill Lynch upgraded AirTran Holdings (AAI ) to buy from neutral.

Analyst Michael Linenberg says he thinks the company is benefiting from changes in corporate travel. He says business passengers are becoming more price-sensitive and, therefore, are relying more heavily on low fare carriers like AirTran. He upped his one cent fourth quarter earnings per share estimate to three cents, the same as consensus, on modestly better revenue production in December. He upped his five cents 2002 earnings per share estimate to seven cents, vs. the six cents consensus. Linenberg thinks AirTran can make money where others can't, aided by costs that are 20%-30% below its major competitors. He sees the company maintaining this cost gap in coming years as it moves entirely to a single aircraft type, the Boeing 717.