Airline Sector Moves To The Downside Wednesday Morning

Wed. August 27, 2008; Posted: 10:59 AM

(RTTNews) - The airlines stocks are experiencing selling pressure Wednesday morning. The sector-wide weakness comes amid higher oil prices and after AMR Corp. (AMR | Quote | Chart | News | PowerRating) shares were downgraded by Citigroup.

By 10:40 am Eastern Time, Northwest stock was down 98 cents to $8.57 a share, while shares of UAL Corp. were down $1.23 to $9.92 and Delta shares were down 71 cents at $7.23.

Crude oil rallied again on Wednesday as Tropical Storm Gustav heads towards the Gulf of Mexico. October crude oil climbed to $118.94, up $2.67 on the session. Prices reached as high as $119.63 in the early going.

Gustav could turn back into a hurricane later today or tomorrow. As a hurricane, Gustav reached landfall in Haiti on Tuesday afternoon, causing killer landslides.

The storm is predicted to reach the Gulf of Mexico over Labor Day weekend, leading to concerns the oil supplies from the region could be disrupted.

Before the opening bell on Wednesday, Citigroup downgraded AMR's stock to "sell" from "hold" in a note on U.S. airlines, as the firm raised its price targets after last month's drop in oil prices. However, Citigroup expects AMR to have further equity raises to cap share prices.

Also on Wednesday, Southwest Airlines Co. (LUV | Quote | Chart | News | PowerRating) said that it will cut 196 flights early net year, in an attempt to deal with higher fuel costs and continuing economic struggles.

The cut represents nearly 6% of Southwest's daily flight schedule, which is around 3,400 flights.

On Tuesday, AirTran had its debt downgraded by Standard & Poor's further into junk status. S&P cut AirTran's debt and corporate credit rating to CCC-plus from B-minus.

However, S&P did reaffirm its ratings for Delta, despite the odds that high fuel prices will create a sizeable loss for the company in 2008. The ratings agency affirmed Delta's B long-term corporate credit rating and removed the ratings from a credit watch but said Delta's outlook is negative.

For full details on Amr Corporation (AMR) click here. Amr Corporation (AMR) has Short Term PowerRatings of 2. Details on Amr Corporation (AMR) Short Term PowerRatings is available at This Link.

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