Airline Stocks Slump After Deutsche Bank Cuts Ratings, Target On Sector Heavyweights

Airline stocks dropped in morning trade Wednesday, after Analyst Michael Linenberg at Deutsche Bank downgraded a number of sector heavyweights on worries that the companies' international businesses will be a source of earnings disappointment for the next few quarters. Shares of American Airlines Group slumped 3.9%, Delta Air Lines shed 3.9% and United Continental Holdings slid 3.4%, after they were all downgraded to hold from buy. He wrote in a note to clients that "the combination of a strong U.S. dollar, greater-than-expected capacity increases by non-U.S. airlines and decelerating global [gross domestic product] growth" is likely to lead to steeper declines in international passenger revenue per available seat miles (PRASM) for the group than currently expected. He slashed his stock price target for American Airlines to $58 from $78, for Delta to $50 from $60 and for United to $70 from $85. Among other more active airline stocks, Southwest Airlines declined 1.4%, JetBlue Airways fell 1.6% and Spirit Airlines dropped 2.6%. The NYSE Arca Airline Index lost 1.4%, and has now shed 3.7% year to date while the S&P 500 has slipped 0.4%.