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Southwest Air Stock Takes Off; Barclays Sees 'Solid Outlook'

Southwest Air rises as Barclays analysts see a 'solid post-pandemic outlook' for the carrier and 'bluer skies ahead for airlines.'

Southwest Airlines  (LUV) - Get Southwest Airlines Co. Report climbed Monday after Barclays analysts upgraded the air carrier to overweight from equal weight and raised their price target to $75 from $64. 

Shares of the Dallas carrier at last check were up 2.2% to $55.55.

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"The recovery has taken longer than expected, but we see bluer skies ahead for airlines and upgrade our industry view to positive as well as the venerable Southwest Airlines to overweight," analyst Brandon Oglenski said in a research note.

The airline industry was severely battered by the Covid-19 outbreak as flights were canceled and travel was severely restricted to slow the spread of the disease.

Southwest Air, the analyst said, "affords long-term investors a fortress balance sheet, favorable order book with Boeing  (BA) - Get Boeing Company Report and an historically profitable business model."

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Oglenski said the company’s successful growth of its frequent flier program coupled with the potential to gain business-market share via inclusion in global distribution systems "bode for a solid post-pandemic outlook for Southwest."

"Investing in airlines has never been for the faint of heart, with volatility a staple of the sector," Oglenski said. 

"However, with ample support from U.S. taxpayers via cash grants and some low cost loans, airline balance sheets have been kept in relatively healthy shape."

The analyst said that he saw fundamentals improving, with "the [Covid] delta variant waning, international borders reopening (U.S. to EU and other visitors this fall) and winter holiday travel periods supposedly booking at favorable levels."

"Business-travel demand will remain the challenge, but with return to office for many industries likely to commence by early 2022, trends are likely to improve," he said.

The latest upgrade follows a similar move by JPMorgan analysts, who last week upgraded Southwest to overweight from neutral and boosted their price target to $70 from $64.

Last month the company joined a list of airlines offering employees extra pay to get inoculated against Covid-19.