British Airways Climbs Steeply as Goldman Sachs Says Get Aboard

The Evening Standard (London, England), September 17, 2009 | Go to article overview

British Airways Climbs Steeply as Goldman Sachs Says Get Aboard


Byline: Mickey Clark MARKET ROUND-UP

STAND by for take-off at British Airways was the advice Goldman Sachs gave to its clients today as it added the shares to its influential Conviction Buy list.

BA shares responded with a jump of 11.4p to 239.9p, making them one of the best performers among the top 100 companies. They have come up from a low of 188p since July and, according to the American broking house, there is scope for a further 45% improvement in the price if the revenue recovery starts on a restructured cost basis.

Goldman has raised its six-month price target from 165p to 315p. It says the revenue recovery is under way and will be achieved by further cost savings and effective hedging against fuel price rises. Margins will also improve more rapidly than other national carriers largely due to BA's exposure to the lucrative North Atlantic routes, the broker adds. Goldman says there are already signs the rate of decline in the airline's premium traffic has begun to stabilise.

The broking house prefers BA to Air France-KLM, which it has dropped from its Conviction Buy list.

BA is currently in merger talks with Spain's flag-carrier Iberia, and has been speaking to American Airlines about a possible alliance.

Investors generally continued to thank their lucky stars for quantitative easing, producing a steady flow of money which has been finding its way back into the stock market, as fund managers -- who have sold corporate bonds to the Bank of England -- use the money raised to look for better returns elsewhere.

But the best gains were not held, and markets blog: follow standard.co.uk/clark the FTSE 100 index saw its lead pared back to 28.54 at 5152.67.

Speculative buying pushed Tullow Oil up 33p to 1220p. The price has come up from 1026p since the start of the month. Tullow yesterday announced an oil find off Sierra Leone. Today, it followed that good news with another discovery, this time in Uganda. Together, the finds would make Tullow much more attractive to any would-be bidder. Earlier this week, Italy's ENI was being tipped to offer up to 2000p a share for Tullow.

Mining shares ran out of steam after an early mark-up with Lonmin losing 41p at 17913/4p, and Xstrata 14p at 965p. …

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