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Airline stocks slip into the red, while US Airways rises
By Christopher Hinton, MarketWatch
Last Update: 10:21 AM ET Nov 24, 2009
NEW YORK (MarketWatch) -- Airline stocks were mostly lower in volatile trading Tuesday morning, though shares of US Airways staged an advance.
At last check, the NYSE Arca Airline Index XAL fell 1.2% to 26.31, with all but one of its 13 components trading lower.
Legacy carriers declined, with American Airlines' parent AMR Corp. AMR off about 1% to $5.51. Delta DAL shed 1.4% to $7.62, and United parent UAL Corp. UAUA fell 1.5% to $7.04.
Bucking the trend, US Airways LCC rose 3% to $3.19 after the carrier said it would defer aircraft deliveries and arranged new credit facilities to shore up is 2009 and 2010 balance sheets.
The transactions should improve the Houston carrier's liquidity by about $150 million for the end of this year and by $450 million for 2010, the company said.
"These moves are part of our continuing efforts to improve our balance sheet and return the company to profitability," said Chairman and Chief Executive Doug Parker.
US Airways will defer 54 Airbus jets previously scheduled for delivery between 2010 and 2012 to 2013 and beyond. That should reduce the company's capital costs by $2.5 billion over the next three years.
It should also reduce near- and medium-term obligations to Airbus and other suppliers by $132 million, the company said.
US Airways will still take delivery of 28 aircraft through 2010, all of which have financing commitments.
Further, US Airways agreed with Barclays to permanently lower the monthly unrestricted cash condition for the advance purchase of frequent-flier miles and defer for 14 months the amortization of $200 million, advanced in connection with the previous purchase of miles.
The company was advised by Seabury Securities LLC, a unit of Seabury Group LLC.
Avondale slashes price targets
Equity-research firm Avondale Partners lowered its price targets for airline stocks under its coverage Tuesday, saying the weaker economy will restrict profit growth through 2010.
"Lacking the earnings that were once anticipated with the major capacity reductions that were implemented, airline stocks will now likely trade parallel with expectations of economic strength," the firm said.
Avondale cut its price target for AMR Corp. to $12 from $32; Continental CAL to $22 from $49; Delta to $13 from $20; UAL Corp. to $13 from $50; and US Airways to $10 from $32.
The firm also reaffirmed its market outperform ratings for the carriers, as well as those of some of their low-cost rivals, such as AirTran AAI, JetBlue Airways JBLU and Southwest LUV.
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