Airline Stocks Close Lower After Raymond James Downgrades

Airline stocks fell sharply Monday after an analyst said the sector will suffer from slower-than-expected U.S. economic growth as well as industry price skirmishes. Raymond James' Savanthi Syth downgraded American Airlines Group Inc. AAL to Market Perform from Outperform. The analyst also cut his rating on Delta Air Lines, Inc.DAL and United Continental Holdings Inc. UAL to Outperform, from Strong Buy. Syth said he continues to expect recent pricing softness to improve during the seasonally stronger summer months. But the analyst said the recovery "is likely to be somewhat muted" because of a lack-luster economic growth and American Airlines "aggressive pricing response" to capacity growth planned by Southwest Airlines Co. LUV. Syth said American's pricing response will affect markets beyond Dallas, adding that airlines will require more time than expected to push through price increases in response to an increase in fuel prices forecast for the second half of the year. The analyst cut his 2015 earnings forecast for both Delta and United by 8 percent and for American Airlines by 10 percent. Syth's forecast for both Delta and United, however, remained well above the current consensus estimates. The NYSE Arca Airline Index XAL closed down about 3 percent Monday. Especially hard-hit stocks included Hawaiian Holdings, Inc. HA, which declined about 7.5 percent to $2.19 at Monday's close. Delta lost more than 5 percent, closing at $40.73 and both American and United were off by about 4.4 percent.