Lehman Ups AMR to Overweight from Equal-Weight

Says the fundamental business outlook has improved for the airline industry

Lehman Brothers raised its investment recommendation on AMR (AMR ) to overweight from equal-weight.

Analyst Gary Chase thinks the risk-reward in American Airlines' parent AMR has improved along with the fundamental outlook for the entire group. He sees a lot of opportunity and optionality in domestic capacity reductions that he envisions for 2006 (currently about 3%.) He says that recent revenue trends are very strong, and he expects those trends will gain momentum as capacity reductions accelerate into the end of the year. With planned capacity reductions, cost savings initiatives, and company-specific drivers of revenue growth, he sees improved fortunes for AMR in 2006. He raised his $2.75 2006 loss estimate to 30 cents earnings per share. He also upped his $16 price target to $18.

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