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Airline Stocks Weaker Even as Oil Retreats, JetBlue, American Downgraded

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By Dhirendra Tripathi

Investing.com – Shares of airline companies were trading weaker Wednesday even as oil prices retreated a little from multi-year highs.

Delta Air (NYSE:DAL), United (NASDAQ:UAL) and Southwest Airlines (NYSE:LUV) traded 1% to 2% lower. American Airlines (NASDAQ:AAL) and JetBlue (NASDAQ:JBLU) slipped around 5% each, a downgrade by Goldman Sachs (NYSE:GS) was also weighing on the stocks.

U.S. crude climbed to $79.78, its highest since November 2014, before retreating to $77.55 with a 1.8% loss as latest data from the Energy Department showed a rise in crude stocks. Inventories in the country rose by 2.3 million barrels last week, a surprise given estimates called for a dip of 418,000 barrels in crude stocks.

Production in the country rose to 11.3 million barrels per day, recovering from Hurricane Ida-related disruptions more than a month ago to rebound near pandemic-level highs but still far from 2019’s 13-mbpd record.

Shale companies in the country continue to exercise restraint on drilling to focus on investor returns, a reason why the U.S. has been unable to counter OPEC+'s efforts to restrict exports. At its Monday meeting, OPEC+ reiterated its intent to up production only gradually, ignoring calls by the U.S. and other big consumers to hasten output enhancement.

Goldman Sachs made it worse for American Airlines and JetBlue today, downgrading the stocks to sell and neutral, respectively. The brokerage blamed American Airlines’ higher operating leverage to weigh on its profitability. Goldman believes capacity growth to be elevated and pricing to lag recovery in traffic in 2022.

Analyst Catherine O’Brien sees American Airlines at $18, 12% lower from the stock’s current level.

She blamed cost headwinds for her views on JetBlue while putting a target of $17 on the stock, around 10% higher from its current market price but 15% lower from her own $20 target set earlier.

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