Citi agrees with Warren Buffett, says time to buy airline stocks

An American Airlines Inc. McDonnell Douglas MD-82 plane sits parked at a gate while a United Continental Holdings plane taxis down the runway at LaGuardia Airport in the Queens borough of New York.
Michael Nagle | Bloomberg | Getty Images

Investors should buy American Airlines, Delta Air Lines and Southwest due to improving sales next year and cheap valuations, according to Citi Research, which initiated coverage on the airlines with buy ratings.

"Cost pressures from fuel and labor are significant and depress earnings in 2017. However, recent changes in the industry are bullish. Slowing capacity growth from the largest carriers, gradually improving pricing, and amazingly easy revenue comps provide solid footing," analyst Kevin Crissey wrote in a note to clients Thursday.

"We think upside revenue surprises are possible, particularly as 2017 progresses. Our bias is to be bullish."

Warren Buffett told CNBC this week that Berkshire Hathaway has taken a stake in Southwest Airlines in addition to its positions in American Airlines, United Continental Holdings and Delta Air Lines revealed in the company's September 13F filing.