Timothy Ross, MD Equity Research, at Credit Suisse says the low-cost carrier segment is the poster-child turned bad boy. Once the savior of the traveling public when they first arrived in Southeast Asia in 2002, budget airlines have grown too big, too fast - and risk going the way of European low cost carriers, which have dragged down industry profitability for much of the last decade.
Analysts prefer big legacy names Singapore Airlines and Cathay Pacific, and are on the same page when it comes to Chinese carriers - which are tapped into the world's fastest growing travel market.
Air China was the top pick and has a price target of as high as HK$7 ($0.90). That represents an upside of more than 50 percent from Friday's price of HK $4.68
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Singapore Airlines (SIA) was also a top pick for its strong balance sheet, large cash pile, and track record of returning value to shareholders Paul Yong, vice president of equity research at DBS Vickers, notes that a third of SIA's market capitalization is net cash. "There's over $4 billion on their balance sheet," he says. "And they have returned about $8 billion to shareholders over 10 years."
Michael Beer, VP, Asia Pacific Transportation and Infrastructure at Citi says Cathay Pacific is the most disciplined among airlines in terms of capacity management.
"While everyone is growing, almost targeting market share, these guys are being pretty disciplined and that's led to better yield trends. I'll take yield any day of the week over volume," he tells CNBC.
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Cathay Pacific has a consensus target price of HK$18.50, representing an upside of about 30 percent from current levels.
DBS's Yong says Cathay has had a lot of success with its premium economy seats, and that other airlines should follow suit and offer this class that is a step above economy but below business.
But, he says, carriers have to be aware of the risks and refurbishing costs.
"They have to consider whether premium economy cannibalizes their business class or lets them upsell from economy class," Yong said.