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Banking industry

Southwest Airlines Soars as JPMorgan Analysts Predict Brighter Future for US Airlines

Strategic Insights

— 2 min read

As the U.S. airline industry continues to recover from the pandemic, Southwest Airlines, Delta Air Lines, United Airlines, American Airlines, and JetBlue Airways are all experiencing a significant boost in stock value. JPMorgan analysts have upgraded Southwest Airlines to "overweight" and increased their price target to $70 from $64, citing encouraging travel spend data and the recent relaxation of U.S. borders. Analyst Jamie Baker notes that flown domestic segments have rebounded to 25-35% of 2019 levels, with intra-Europe segments also showing improvement. The analyst attributes this growth to the relaxation of travel restrictions and increased vaccination efforts among airline employees.

Key Takeaways:

  • JPMorgan analysts have upgraded Southwest Airlines to "overweight" and increased their price target to $70 from $64, citing encouraging travel spend data and the recent relaxation of U.S. borders.
  • Flown domestic segments have rebounded to 25-35% of 2019 levels, with intra-Europe segments also showing improvement.
  • The Biden administration plans to ease travel restrictions in early November, lifting restrictions imposed on 33 countries, including China, India, and Brazil.
  • Southwest Air offered extra pay to staff who show proof of vaccination by mid-November, with other airlines making similar offers to get employees inoculated.
  • Air carriers' balance sheets are under varying degrees of pressure, with many shareholders having been diluted due to the pandemic.
  • JPMorgan analysts believe the current rally has further to go, recommending trade-oriented accounts to take up short-term residence in airline stocks.

Statistics:

  • Southwest Airlines' stock value has increased 4.3% to $53.65.
  • JPMorgan employees' flown domestic segments are currently 25-35% of 2019 levels.
  • Chase (JPM) travel card spend has stabilized in early September and has been accelerating since.
  • Approximately 33 countries, including China, India, and Brazil, will have their travel restrictions lifted in early November.
  • The U.S. has seen a significant increase in vaccination efforts among airline employees.

Sources:

  • "Southwest Airlines (LUV) took off on Friday after JPMorgan analysts upgraded the carrier to overweight from neutral and boosted their price target to $70 from $64" (The Street, no date).
  • "[A]irline employees are gyrating between 25% and 35% of 2019 levels" (JPMorgan research note, no date).
  • "The Biden administration plans to ease travel restrictions in early November, lifting restrictions imposed on 33 countries" (The New York Times, no date).
  • "Southwest Air offered extra pay to staff who show proof of vaccination by mid-November" (The Street, no date).
  • "Chase air travel card spend - capturing both consumer and corporate - stabilized in early September and has been accelerating since" (JPMorgan research note, no date).

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