MARKETS SPECTATOR: Aviation updraft

Citigroup says Qantas stock is a buy ahead of a "watershed year" for the two big Australian airlines.

Citigroup's aviation analyst in Australia, Anthony Moulder, says Qantas shares are a buy and has a $2.30 price target for the stock.

At 1025 AEST Qantas shares were up 5 cents, or 3.3 per cent, to $1.57, while the S&P/ASX200 Index was up 16.748 points, or 0.3 per cent, to 4987.40 points after choppy early trade.

But Moulder rates Virgin ‘neutral’ with a 45-cent price target for its shares. Virgin shares at 1025 AEST were down 0.6 per cent to 43 cents.

Meanwhile, Moulder says that 2014 will be a “watershed year” for the two Australian airlines.

“Domestic pricing on leisure markets remains aggressive, (but) we expect this to subside in the next couple of months, leading into a watershed year for Australian aviation,” he wrote in a research note.

“In addition to a more rational domestic market as Virgin integrates Tiger, we also see Qantas and Virgin benefiting from their international alliances.”

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