Since January 2008, the MSCI Asia/Pacific airlines index has lost 33 percent and underperformed the MSCI Asia/Pacific index by about 8 percent – despite a rise of 15 percent last year.

In an advisory note, Morgan Stanley analysts said investors should switch from airlines with high cargo exposure to those with a focus on premium passengers. "As the global economy recovers and premium travel returns, we believe the well-capitalized airlines will be competitively positioned to participate in the recovery phase of the airline industry cycle," they suggested.

"We expect record operating profit from airlines with big cargo exposure," said the analysts, adding that air cargo growth could slow in the fourth quarter of this year and 2011. Passenger revenue, meanwhile, could increase at a faster rate than cargo, driven by premium travel.

"Low retail inventory and strong semiconductor sales led to exceptional air cargo revenues for the past nine months," said the investment advisor. "We view the strong cargo growth as unsustainable in 2011, due to buildup in surplus freighter capacity and widening air-to-ocean freight rates."

The company said it had downgraded Korean Air, as well as China Airlines and EVA Airways.

"We note that the market has already factored in significant earnings expectations for these companies, their share prices have either more than or nearly doubled from their lows, and all three have significantly beaten their respective markets since the beginning of the year," it added.