American Airlines Group Inc. was downgraded at J.P. Morgan Thursday, which had been bullish on the air carrier since at least December 2013, saying the wage increases being implemented is a “worrying precedent” for both American and the industry. Analyst Jamie Baker cut his rating to neutral from overweight. He slashed his stock price target to $52, which is 12% above Wednesday’s closing price of $46.40, from $59. The stock slumped 4.6% in premarket trade, after the company reported first-quarter earnings, and said it would raise the base pay for flight attendants and pilots, outside of contract negotiations, to industry highs. “We are troubled by [American’s] wealth transfer of nearly $1 billion to its labor groups,” Baker wrote in a note to clients. “In our minds, this is a seminal event, and represents the first, credible potential blow to our long-held ‘it’s different this time’ investment thesis.” Among other airline stocks, Delta Air Lines Inc. slid 2.2% premarket and United Continental Holdings Inc. shed 1.9%. American’s stock has soared 26% over the past 12 months, while the NYSE Arca Airline Index has rallied 25% and the S&P 500 has gained 14%.
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