A new report by Morgan Stanley analyst Rajeev Lalwani focuses on the firm’s bullish outlook for the airline industry. Morgan Stanley sees strong fundamentals in the space and believes that patient airline investors will be rewarded as the current cycle plays out.

In addition, Morgan Stanley initiated coverage on several big-name airline stocks.

Value Plays

In the report, Lalwani praised the strong (about 10 percent) free cash flow (FCF) yields, the potential for double-digit earnings growth and the low (about 10x) price to earnings (P/E) ratios in the airline industry as indicators of the value opportunity for investors.

Lalwani believes that these strong industry fundamentals, including capital returns, will continue to limit the potential downside for shareholders as well.

Patience Required

Lalwani cautions…

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