Analyst raises price targets on U.S. airline stock

Airline analyst Jamie Baker of JP Morgan has done an excellent job of keeping his enthusiasm in check over the years.

So it's probably notable when he raises the earnings projections and price targets on a bunch of airline stocks on a single day, as Baker did on Tuesday.

He points to falling energy prices that likely will lower the fuel bills of U.S. airlines about $5.5 billion in 2010, and he expects operating profits to hit a record $13.4 billion in 2011.

"The broader thesis is unchanged; manageable fuel, tight supply, incremental revenue streams, disciplined managements and rapidly recovering demand portend a multiyear profit run for U.S. operators, in our view," Baker said.

December 2010 price targets

Company	Previous target price	New target price	May 25 close
AirTran Holdings	$9.50	$10.50	$5.33
Alaska Air Group	$36.00	$40.00	$45.95
AMR	$14.00	$16.00	$7.14
Delta Air Lines	$18.50	$19.50	$13.84
JetBlue Airways	$6.50	$7.50	$5.90
Southwest Airlines	$17.50	$20.00	$12.16
US Airways Group	$8.50	$11.50	$7.81

He also raised the earnings estimates for the same airlines, which meant bigger profits for all but AMR. For AMR, he predicts a smaller loss.

Here are the previous full year 2010 estimates compared to his revised estimates. I've translated his earnings per share into total net income, in millions:

Company	Previous 2010 estimate	Revised 2010 estimate
AirTran Holdings	$76	$105
Alaska Air Group	$244	$257
AMR	-$216	-$167
Delta Air Lines	$1,739	$1,830
JetBlue Airways	$88	$126
Southwest Airlines	$751	$863
US Airways Group	$256	$388

Of particular note, he now expects Delta in 2011 to post net income just over $3 billion, which must be a one-year record for an airline. Southwest he expects to hit close to $1.2 billion in net income, beating its previous record by about a half billion dollars.

He raised his AMR estimate for 2011 to $230 million in net income. If so, it would be AMR's first profitable year since 2007.

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