"American is the most exposed to capacity concerns that have arisen of late given that it goes head to head with Southwest (LUV) in Dallas," wrote Merrill Lynch analyst Andrew Didora in a report.
Additionally, Didora said, "The company faces its biggest integration risk with the reservation system cutover this fall," following the 2013 merger with US Airways. He cut his price objective to $50 from $64.
Didora also cited three other concerns.
For one, Delta's (DAL) May traffic report, issued Tuesday, cited "lower domestic yields" as roughly half of the reason for a 5.5% decline in passenger revenue per available seat mile. Delta PRASM fell 5.5%. The carrier said the other half of the decline was due "to foreign exchange pressure and lower surcharges in international markets."
Additionally, Didora said, American has projected $5 billion in capital expenditures in 2016. Also, the carrier is unhedged and fuel prices appear to be rising.
In trading shortly after the opening bell on Wednesday, American shares were down 59 cents to $43.19. Shares are down 20% year-to-date, the biggest loss among the big four airlines.
The downgrade follows Jim Cramer's assessment Friday that airlines, "right now, are in free fall" and that, if he were a buyer of airlines, he "would wait for the downgrades to happen."