Dahlman Rose Reiterates Buy Rating on Delta Air Lines (DAL)

Dahlman Rose is out with a research report this morning, where it reiterates its Buy rating on Delta Air Lines DAL; it has a $16.00 price target on the stock. The Dahlman analysts cited the company’s investor meeting held yesterday, where efficiency was the focal point. The company said that they were going to build $1.2 billion state-of-the-art facility to replace the aging Terminal 4. The project is financed with $98MM in cash, which has already been paid, $300MM in passenger facility charges, and $800MM of Airport Bonds. The analysts think that this new facility will resolve DAL’s operational issues at JFK. Management reiterated capacity guidance of +1% for 3Q10, +5%-+7% for 4Q10 and +1%-+3% for 2011. The Dahlman analysts believe this is reasonable due to “capacity that has come out of the system thus far for Delta, down 2.1% ytd, while the industry is down 0.9%. Delta is adding 10-15 wide body aircraft back into service in 4Q10.” They also noted that pricing continues to see improvement, up 17%-19% in July, while August trends have seen similar strength.