Stifel Upgrades, Downgrades Airlines Facing Coronavirus Shock, Says Hawaiian Well-Positioned

A near worst-case scenario is playing out for airlines as the coronavirus pandemic freezes travel, according to Stifel.

The Airline Analyst

Although the timing is difficult to predict in the current situation, it's likely that airlines will need to keep scheduled flying suspended in the near future and capacity is expected to be limited in the second quarter, Stifel’s Joseph DeNardi said in a Wednesday note.

Hawaiian Well-Positioned, Stifel Says

DeNardi upgraded Hawaiian Holdings, Inc. HA from Sell to Hold, and reduced the price target from $23 to $13. (See his track record here.)

The upgrade is based on an improved risk-reward setup for the carrier following a sharp downturn in its share price, the analyst said. Hawaiian Holdings will be well-positioned to serve the market and could witness “a more benign competitive capacity environment for a period following the pandemic," he said.

Mesa, America, JetBlue Downgraded

DeNardi downgraded Mesa Air Group Inc MESA from Buy to Hold and cut the price target from $12 to $5. The pandemic had increased risk for this regional carrier to extend certain contracts with American Airlines and grow block hour production going ahead, the analyst said.

Stifel downgraded American Airlines Group Inc AAL from Buy to Hold and reduced the price target from $55 to $13. The equity value of the core airline business has deteriorated due to softer travel demand and the need for increased debt financing, DeNardi said.

The analyst downgraded JetBlue Airways Corporation JBLU from Buy to Hold and trimmed the price target from $26 to $11. The previous Buy rating was based on JetBlue's ability to generate industry-leading earnings growth and the potential for it to become a takeout target, he said.

“We see a lower probability that either scenario will play out as COVID-19 leads to significant pressure in JetBlue's focus cities.