Delta Draws Blood in Seattle as Analyst Cuts Alaska's Rating

SEATTLE(TheStreet) -- As the David and Goliath battle between Alaska Airlines  (ALK) and Delta  (DAL) for dominance at Seattle Tacoma International Airport continues to ratchet up, Delta seems to have drawn first blood as a leading airline analyst downgraded Alaska because of the conflict.

In a note issued Friday, Deutsche Bank analyst Mike Linenberg downgraded Alaska to sell from hold, noting that Alaska is planning to boost service at Delta's hub in Salt Lake City.

"We view these measures as retaliatory on the part of Alaska in response to Delta's significant growth in its Seattle backyard," Linenberg wrote. "Furthermore, the recent moves by both 'partners' suggest that their long-standing code share and marketing agreements could be unraveling.

"While these actions are negative for both airlines, the fact that Delta is roughly eight times the size of Alaska (i.e. $38 billion of revenue estimated for 2013 vs. Alaska's $5 billion) leads us to believe that Alaska will be disproportionately impacted," he said.

Alaska shares closed Friday at $75.85, down $1.10 on an up day for the market. Shares have risen 71% year-to-date. Linenberg said his 12-month price target is $70. His 2014 per share estimate for the carrier is $5.25, well below the consensus estimate of $6.35.

"We are hopeful that both airlines can resolve their various issues so as to maintain their long-standing partnership," Linenberg said. "We are of the view that that would be a far better outcome than what is in store for next year."

Last week included two Seattle-related announcements by Delta. First, the world's second-biggest airline said it will begin non-stop Seattle-Fairbanks service in May and non-stop Vancouver, Canada, service in June. Also, at historic Boeing Field in Seattle, Delta unveiled a Boeing 737-900 that it named "Spirit of Seattle." Alaska responded on Twitter with a photo of one of its aircraft and this text: "The original 'Spirit of Seattle' a nod to the beautiful city we call home."

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