September 25, 2008 / 1:50 PM / in 9 years

UPDATE 1-Stifel Nicolaus starts 4 U.S. airlines with buy

 (Recasts; adds analyst comments)
 Sept 25 (Reuters) - Stifel Nicolaus started four U.S. airlines with a “buy” rating, and said high fuel prices served as an impetus for the airline industry to restructure itself.
 The rapid increase in oil prices led carriers to retire old fuel-inefficient aircraft and cut less profitable routes, analyst Hunter Keay said.
 U.S. airlines had entered a new period defined by air travel becoming a mid-priced luxury good, the analyst said.
 “With oil pulling back from previous highs, airlines now have increased breathing room from a liquidity perspective,” Keay wrote in a note to clients.
 But new capacity in the industry was unlikely, as there was limited capital in the market to fund start-up ventures, Keay said.
 Keay started AMR Corp AMR.N, Continental Airlines Inc (CAL.N), Delta Air Lines Inc (DAL.N) and UAL Corp UAUA.O with a “buy” rating and Southwest Airlines Co (LUV.N) with a “hold” rating.
 The following are Stifel’s ratings and price targets on U.S. airline stocks:
 (in $)
 Company Name                       Rating        Price Target
 AMR Corp AMR.N                     Buy            18.00
 Continental Airlines Inc (CAL.N)     Buy            27.00
 Delta Air Lines Inc (DAL.N)          Buy            16.00
 UAL Corp UAUA.O                    Buy            19.00
 Southwest Airlines Co (LUV.N)       Hold              —  (Reporting by Arup Roychoudhury in Bangalore; Editing by Pratish Narayanan)   

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