UBS has initiated coverage on U.S. airline stocks, forecasting stronger growth in revenue per available seat mile (RASM) by 2025 and improved profit margins. The bank has issued a "buy" rating for Alaska Air Group (ALK), United Airlines (UAL, Financial), and Delta Air Lines (DAL), anticipating these airlines will achieve attractive profit growth. High pre-tax profit margins and healthy balance sheets are expected to mitigate risks associated with fluctuating travel demand and potential cost inflation.
Conversely, UBS has assigned a "neutral" rating to American Airlines (AAL), Loyalty Ventures (LYLT), and Frontier Group (ULCC). The bank remains cautious on Southwest Airlines (LUV) and JetBlue Airways (JBLU), giving them a "sell" rating. Concerns about Southwest Airlines include weak profit margin performance, valuation premium, and risks associated with new service and revenue strategies. For JetBlue Airways, UBS is worried about the company's ability to transition to positive operating margins by 2025, cash burn issues, and a highly leveraged balance sheet.
