irline shares down as oil pierces $70 level Mon Apr 17, 2006 3:11 PM ET
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NEW YORK (Reuters) - Shares in JetBlue Airways Corp. (JBLU.O: Quote, Profile, Research) and Continental Airlines (CAL.N: Quote, Profile, Research) slid about 10 percent on Monday, leading a decline in airline stocks on concern about crude oil prices breaking the $70 barrier.
JetBlue, a one time investor darling, was down 95 cents, or 9.5 percent, at $9.48, just off a 3 1/2-year low touched earlier in the session. JetBlue shares are down 38 percent so far this year. Continental Airlines (CAL.N: Quote, Profile, Research), which has been this year's hottest airline stock, was $3.20, or 11.7 percent lower, at $24.17.
AMR, the parent company of American Airlines, the No. 1 U.S. carrier, was down $2.32, or 9 percent, at $23.58, and the industry-wide Amex Airlines index <.XAL> was down 6 percent, its steepest decline in three months.
U.S. crude oil prices topped $70 on Monday, the highest level in nearly eight months, as Iran's pursuit of its nuclear program heightened fears the U.S. might take military action again the oil-producing nation.
"It's making me nervous," said Ray Neidl, an analyst with Calyon Securities. "Most days it's over $70 a barrel I become very nervous."
"All these revenue increases they're getting are going to be offset by higher oil prices," he said of the airlines, adding that his forecasts had been based on oil prices in the low $60s.
Oil is the second largest expense for most airlines -- which start reporting first quarter earnings this week -- after labor.
Continental, which has rallied this year and is still up 14 percent year-to-date, was also hit by a Lehman Brothers downgrade to "underweight" from "equal-weight."
JetBlue was hit by the higher oil prices as well as a research note from JP Morgan analyst Jamie Baker, who he expected the discount carrier to sell some of its older aircraft or slow deliveries of new planes.
He said the move would be a long-term negative for the stock.
JetBlue declined to comment on the JP Morgan note.
Even Southwest Airlines Co. (LUV.N: Quote, Profile, Research), the low cost carrier best protected from high fuel prices by contracts which lock fuel prices in at below-market prices, was hit by the selloff, falling some 5.5 percent in afternoon trading.
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