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Demand Questions Surface in Delta, US Airways Reports

Derchin slightly reduced first-quarter estimates for Delta and US Airways, to 2 cents and 26 cents, respectively, but he has buys on both. He also has the same $19 price target for both. He said sequestration would have impacted Delta's Atlanta hub because of the high concentration of military bases in the Southeast; Charlotte likely felt a similar impact. But it is worth noting, he said, that both carriers will report a first-quarter profit, a rarity for airlines.

Sterne Agee analyst Jeff Kaufman said Delta's failure to meet guidance was unexpected. "The airline that most investors viewed as the one without 'concerns' surprised analysts with a concern,'" Kaufman wrote in a report. But he said sequestration and "a new revenue management strategy that misfired" were both one-time events. Although he reduced his first-quarter estimate to 5 cents from 16 cents, he retained a buy on the shares and a $21 price target.

Wolfe Trahan analyst Hunter Keay said the PRASM disappointment reflects differing strategies, nothing more. "We think US Airways stimulated March traffic with low fares following a poor February, and Delta optimistically held out for higher fares following a good February," he wrote. "The sell-off in stocks this week feels well overdone and more about the stock charts than about fundamentals. What's really changed with the big picture bull thesis, after all?

Investors will have more PRASM information next week from United, which will report traffic after the close on Monday, and American.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here: Ted Reed

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