UBS has started covering U.S. airlines and has projected "attractive" earnings growth for Alaska Air Group, United Airlines, and Delta Airlines.
The brokerage expects these three airlines to have stronger revenue per available seat mile (RASM) and improved margins in 2025.
UBS rates them as "buy" due to their high pre-tax margins and strong balance sheets, which could help mitigate risks associated with fluctuating travel demand and potential cost inflation.
On the other hand, UBS has given a "sell" rating to Southwest Airlines and JetBlue Airways.
Southwest's poor margin performance, expected to be around 1% in 2024, along with a premium valuation and execution risks related to new service and revenue strategies, are the concerns.
JetBlue faces challenges with uncertainty about its transition to positive operating margins by 2025, short-term liquidity usage, and high balance sheet leverage.
Following this news, United and Delta saw slight increases in their shares, while Alaska Air experienced a minor decline.
Southwest and JetBlue shares also fell, with Southwest down 1% and JetBlue down 3.1%.