Alaska Airlines Is Downgraded Because of Delta's Seattle Incursion

NEW YORK (TheStreet) -- A leading airline analyst downgraded shares of Alaska Airlines , one more marker in the continuing debate over whether Alaska can withstand the Delta onslaught in Seattle. In a report issued Thursday, JPMorgan analyst Jamie Baker downgraded Alaska to underweight from neutral, writing, "We see little reason to accumulate Alaska shares at current levels." Must Read: United Flies the 787, American Awaits It, Delta Thinks It Overa "Total other airline capacity in Alaska markets is expected to rise close to 8% in Q4, where capacity in Delta overlap markets is expected to rise in excess of 20%," Baker wrote, adding that in the first quarter of 2015 other airlines will likely boost capacity in Alaska markets by 15% while Delta will likely boost capacity by 30%. "We expect Alaska revenue per available seat mile and margin momentum will handily underperform the industry next year," Baker said. He has a target price of $51. Alaska shares were trading down 2.2% to $51.75 in trading early Thursday. Year to date, shares are up 42%, while Delta shares have risen up 45%. Southwest leads the airline industry with an 83% year-to-date gain; the smallest gain at a major airline is 35% at JetBlue . TheaS&P 500 has risen 7% this year. Falling fuel prices, capacity discipline and strong demand have fueled the airline share price gains. Baker's view is not universal. CRT Capital analyst Mike Derchin rates Alaska a buy -- he raised his target price to $61 on Monday after raising his fourth-quarter earnings estimate to 87 cents a share. Analysts surveyed by Thomson Reuters also estimate 87 cents. "Offsetting PRASM pressures from competitive battles are a number of tailwinds that include its strong position with frequent fliers in its region, unrelenting cost controls, substantial free cash flow generation, aggressive share buybacks and lower jet fuel prices," Derchin wrote. Alaska beat estimates in the third quarter, reporting earnings of $1.47 a share, vs. consensus of $1.42. For the quarter, Stifel analyst Joseph DeNardi wrote that among all the carriers "Alaska's results were most impressive, in our view, as strong execution and effective management have been able to offset competitive pressures thus far, though this will become more challenging over the next few quarters." Must Read: Alaska Air Challenges Delta Assault with Secret Weapon: Motivated Employees Wolfe Research analyst Hunter Keay may be Alaska's biggest booster. He has an overweight rating, a target price of $75, and a dim view of Delta's effort to build a Seattle hub. In a report issued Friday, Keay wrote that Delta could be "rethinking its Seattle strategy," given recent announcements that Seattle-Haneda and Seattle-Amsterdam will be seasonal routes. "We still predict Delta fails there (in Seattle)," Keay wrote, although he noted that "Delta is sure to grow much more before it shrinks a bit, and Delta is likely to stay there. We just think people underestimate Alaska's resolve. "Alaska is a company that does things the right way," Keay wrote. "So when results are good it's even easier to get behind the story. They are the good guys." -- Written by Ted Reed in Charlotte, N.C. To contact this writer, click here. Follow @tedreednc " a

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