Why United Airlines Is RayJay's Top Airline Pick For Travel Recovery

The global vaccination process against the novel coronavirus could start within days, and Raymond James' airline analyst is modeling what this means for the sector.

The Analyst: Savanthi Syth made a handful of rating changes:

American Airlines Group Inc AAL downgraded from Market Perform to Underperform, no price target.

Delta Air Lines, Inc. DAL downgraded from Outperform to Market Perform, no price target.

Southwest Airlines Co LUV downgraded from Strong Buy to Outperform, price target lifted from $49 to $54.

United Airlines Holdings Inc UAL upgraded from Market Perform to Outperform with a new $60 price target.

The analyst also updated a handful of price targets:

Alaska Air Group, Inc. ALK maintained at Strong Buy, price target lifted from $50 to $65.

Allegiant Travel Company ALGT maintained at Strong Buy, price target lifted from $155 to $215.

JetBlue Airways Corporation JBLU maintained at Market Perform, no price target.

Mesa Air Group Inc MESA maintained at Outperform, price target lifted from $6.50 to $10.

SkyWest, Inc. SKYW maintained at Strong Buy, price target lifted from $42 to $56.

Spirit Airlines Incorporated SAVE maintained at Market Perform, no price target.

Related Link: 3 Airline Stocks To Buy, According To Seaport Global

The Thesis: The near-term outlook for the airline industry remains mixed, Syth said in an industrywide report.

Thanksgiving was the busiest week since the start of the pandemic, with 6.3 million passengers flying, but the key travel and tourist hubs of Los Angeles and Nevada enacted new lockdown measures that would impact people's willingness to visit, the analyst said. 

Nevertheless, investors looking to gain exposure to the sector ahead of the vaccine rollout may want to consider "quality and liquidity" names like Southwest and Delta, she said.

The industry could see its first tailwind in early 2021 with the passing of stimulus programs, followed by pent-up travel demand during summer 2021, according to RayJay. 

The United Airlines Upgrade: United was the lone upgrade, and Syth said company is better-positioned to take advantage of a recovery in travel.

Most notably, the company secured a pilot agreement that lasts until the end of 2022, the analyst said. Also, United is not enacting any permanent fleet retirements, and the analyst said its competitors are likely to need more time to bring capacity back online.