COVID-19 To Have 'No Permanent Negative Margin Impact' On US Airlines: JPMorgan

One of the sectors that has already been dramatically affected by the COVID-19 pandemic is airlines. The sector saw decreased travel due to restrictions and lower margins with new safety procedure costs and in many cases fewer seats available to book.

Could things turn out okay for the industry?

The Airline Analyst: JPMorgan analyst Jamie Baker upgrades shares of JetBlue Airways JBLU from Underweight to Overweight and raising the price target from $15 to $25.

The analyst upgrades Southwest Airlines LUV from Underweight to Neutral and raises the price target from $44 to $60.

The analyst upgrades Spirit Airlines SAVE from Underweight to Overweight and raises the price target from $31 to $54.

Related Link: Best Airline Stocks Right Now

The Analyst Takeaways: Corporate demand for airlines could rebound to 80% of estimated 2019 levels according to the analyst.

“We believe Covid-19 will have no permanent, negative margin impact on the US airlines,” Baker wrote in a note.

Higher interest costs can be reduced more quickly than lower operating costs, according to the analyst. New forecasts for 2022 are recast by the analyst, calling for a 95% recovery in leisure air traffic versus 2019 and 66% corporate recovery.

The analyst had prior forecasted 2022 as a recovery year approaching a return to normalcy. The belief now is that 2022 could be a transition year towards a longer-term improvement in the industry.

Baker calls the wildcard to the airline industry corporate demand. The possible downside to the new price targets and earnings projections comes from the timing of the recovery of both leisure and corporate air traffic.