Bernstein says Delta to rally 28% in 12 months on increased business travel, possible dividend hike

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Bernstein on Monday upgraded Delta to outperform from market perform as the airline sees higher demand while maintaining discipline on costs.

"We see less to fear in an inflationary market for the U.S. airline industry, as cost pressures are more known (contracts for the most part done), carriers are more likely to maintain capacity discipline and passengers may be in a better position to pay more (increase in demand for business travel or more discretionary income)," equity analyst David Vernon wrote in a research note.

He says higher revenue trends in 2017 could set the foundation for investors to expect "cash returns" in the months ahead, a development that could further attract new money into the stock.