Deutsche Bank upgrades European airlines

(Sharecast News) - Deutsche Bank upgraded the European airlines sector, including easyJet and British Airways owner IAG, to 'overweight' from 'underweight'.The sector has been the worst performing European sector in 2018, underperforming the market by 22% on a combination of weak euro area growth momentum and oil prices rising 16%.Analysts project euro area PMI momentum to improve by early next year, helped by the reduced drag from euro strength and a favourable swing in the inventory cycle, with Brent crude oil to remain around $80 per barrel by end of the first quarter next year."Taken together, our base case projections for the PMI and for oil imply around 30% upside for airlines' price relative from current levels by March."Analysts are positive on the sector, given "attractive" valuations, paired with the scope for capacity growth, revenue improvements and cost savings, with the sector trading on a 50% P/E discount to the market, more than one standard deviation below the long-run average.Individually, IAG was the key pick in the sector, with Lufthansa and Wizz Air also rated at 'buy', while easyJet, Ryanair and Air France were all on 'hold'.