NEW YORK ( TheStreet) -- Even a 6% growth rate at Southwest ( LUV) is too high, said Barclays analyst David Fintzen, who downgraded shares of the Dallas-based carrier on Thursday even as he remained bullish on the airline industry.
Looking to 2016, Fintzen wrote in a report, "Even the diminished 6% growth rate will prove too aggressive and drive disappointing relative margin performance. He downgraded Southwest to underweight from overweight.
In premarket trading, Southwest shares were down 57 cents to $33.84. Year to date, the shares are down about 20%.
Southwest's growth rate guidance has been a hot topic for the past month, ever since Chief Financial Officer Tammy Romo told an investor conference on May 18 that the carrier expected full-year growth of 7% to 8%, up from previous guidance of 7%. That prompted a 3% decline in the share price.
On June 9, CEO Gary Kelley dialed it back, saying the carrier has pulled down second-half capacity growth so that full-year growth will be 7%. He also said 2016 growth will be approximately 6%.
Fintzen said the problem is that Southwest has been trading as a margin "catch-up" story, but now it trades at a premium to other carriers. Higher margins may be justified on the carrier's traditional high frequency short-haul routes, but projected expansion involves "weaker relative (revenue per available seat mile) performance and a smaller cost advantage in longer, larger and business-travel-dominated markets," he said.
In a second report issued Thursday, Fintzen said he remains bullish on airlines because he believes that a "balance of power" now exists in the industry.