February 20, 2008 / 2:40 PM / in 10 years

UPDATE 1-RESEARCH ALERT-UBS ups price targets on US airline cos

 (Recasts, adds details)
 Feb 20 (Reuters) - UBS raised its price targets on U.S. airline companies, including Delta Air Lines Inc (DAL.N) and Northwest Airlines Corp NWA.N, on expectations of a consolidation in the industry.
 A possible merger between Delta Air Lines and Northwest would likely lead to follow-on deals moving the airline sector higher, the brokerage said.
 UBS said it raised its price targets on the companies to reflect an increased likelihood that two deals get announced as the revenue impact of two simultaneous deals had not been priced into the stocks. “It appears that an attempt at industry consolidation may again be here. This is much needed to offset what has become a weak economy with very high fuel prices,” UBS said in a note to clients. Many airline experts, including leaders of top U.S. carriers, say mergers are needed to help stabilize the volatile industry, which finally emerged from a five-year slump in 2006 after racking up $35 billion in losses.
 The brokerage, which said Continental Airlines Inc (CAL.N) is its top pick, changed its price targets on the following companies:
                                          Price Target
Name                         Rating     Current      Prior
AirTran Holdings AAI.N     Neutral    $9           $7.50
Alaska Air Group (ALK.N)     Neutral    $29          $26
AMR AMR.N                  Neutral    $17          $14
Continental Airlines (CAL.N) Buy        $36          $30
Delta Air Lines (DAL.N)      Buy        $22          $19
JetBlue Airways (JBLU.O)     Sell       $5           $4
US Airways LCC.N           Buy        $18          $16
Southwest Airlines (LUV.N)   Neutral    $14          $13.50
Northwest Airlines NWA.N   Buy        $22          $19
UAL UAUA.O                 Buy        $45          $37  (Reporting by Amulya Nagaraj in Bangalore; Editing by Deepak Kannan)   

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