JP Morgan Downgrades JetBlue Air to Underweight

Analyst Jamie Baker says several discount carriers are overpriced

JP Morgan downgraded JetBlue Airways (JBLU ), Frontier Airlines (FRNT ), and AirTran to underweight from neutral.

Analyst Jamie Baker says these three discount carriers are still largely priced for perfection despite deteriorating profits and narrowing cost advantage. He upgraded ExpressJet (XJT ) and SkyWest (SKYW ), and Pinnacle Airlines (PNCL ) to neutral from underweight.

Baker notes his fundamental regional jet thesis hasn't changed, but share prices have, with regionals down 31% year to date, vs. 16% for low-cost carriers. He says his 2004 industry loss estimate os now $4.5 billion on excessive oil prices and continued revenue softness. His 2005 breakeven estimate assumes $38 oil, flattish revenue per available seat mile trends, and continued cost disciplines excluding fuel costs.