U.S. airline stocks tumbled on Tuesday, smacked by a spike in oil prices amid unrest in the Middle East.
"The airlines are having a tough day of it. And it's to be expected, given everything happening out there," said Helane Becker, an airline analyst with Dahlman Rose & Co.
The main drag on airline stocks was an oil rally, which boosts the prices of jet fuel, a top cost for airlines. U.S. crude oil was up $4 to $93.71 per barrel on concerns that the revolt in Libya could spread to other major oil producers.
According to the Air Transport Association, an airline trade group, every penny-per-gallon-per-year increase in the price of jet fuel means $170 million to $180 million in additional fuel expenses for the industry.
The Arca airline index was down 3.97 percent in morning trade. United Continental Holdings was off 6.5 percent to $25.17, Delta Air Lines fell 7 percent to $10.69, and AMR Corp., parent of American Airlines, dropped 5.6 percent to $7.02, all on the New York Stock Exchange.
U.S. airlines have been recovering from an industry downturn caused by oil price volatility and an economic recession that drained travel demand.
Becker said carriers are better insulated from oil shocks than they were a few years ago because of airline mergers and strategic capacity restraint that has kept airplanes full and fares moving higher.
"I think we would use it as a buying opportunity," Becker said of Tuesday's share price declines
One fare tracker — Farecompare.com — said a $10 round-trip domestic fare hike initiated by Southwest Airlines last week was quickly matched over the weekend by all domestic airlines.
It was the fourth broad-based domestic fare hike this year, Farecompare Chief Executive Rick Seaney said in an e-mail.
© 2017 Thomson/Reuters. All rights reserved.