U.S. Airlines Gain as Deutsche Upgrades on Recovered Fuel Costs

(Bloomberg) -- Airlines climbed in early New York trading after two of the biggest U.S. carriers showed they were able to offset rising fuel costs amid strong passenger traffic trends, prompting Deutsche Bank analyst Michael Linenberg to upgrade three of the stocks to buys.

Linenberg raised his ratings on Delta Air Lines, United Continental and American Airlines from holds after both Delta and United showed third-quarter fuel recapture rates of 85 percent and 100 percent respectively, “far better than even our most optimistic projections,” he wrote. The analyst, who downgraded the airline stocks in July, added that strong passenger demand in the U.S. and in transatlantic markets is supporting the internal levers airlines can use to manage fuel costs.

United Continental rose 5.7 percent in pre-market trading to about $88 per share, a level it hasn’t seen since Oct. 1. Delta gained 4.1 percent, American added 3.4 percent, Southwest Airlines rose 1.6 percent; JetBlue Airways and Alaska Air Group also rose. The gains should be welcome relief for a sector that’s fallen 9 percent since the beginning of the month.

©2018 Bloomberg L.P.