Sector snap: Airline stocks drop as oil hits $120 a barrel
NEW YORK—Airline stocks fell sharply Monday as oil prices topped $120 a barrel for the first time.
The Amex Airline Index fell 2.8 percent to 23.59 in late morning trading. The broader market eased more modestly, with the Dow Jones industrial average down 0.6 percent to 12,979.63.
Oil prices hit their latest record amid concerns about overseas supply and a falling dollar. Light, sweet crude for June delivery rose to a new trading record of $120.21 a barrel on the New York Mercantile Exchange, then retreated to trade up $3.52 at $119.84.
Airline shares often move opposite oil prices because fuel represents many carriers' biggest expense.
United Airlines parent UAL Corp. was among the sector's biggest decliners. Investors have been watching for news about the carrier, the nation's second largest, amid speculation it might soon announce a combination with US Airways Group Inc. Media reports indicate an announcement of a possible deal could come within the next two weeks, though many details remain unresolved and a tie-up is not guaranteed.
UAL shares fell $1.02, or 6.4 percent, to $14.87. US Airways sank 48 cents, or 5.5 percent, to $8.24.
Shares of regional carrier ExpressJet Holdings Inc. fell 17 cents, or 5.5 percent, to $2.91 after Soleil Securities analyst James Higgins increased the amount he expects the company to lose this year, and predicted a large loss in 2009.
"Our latest view suggests a high probability of insolvency by the end of next year if ExpressJet's current business model is kept," Higgins said, added that he expects a takeover bid by rival SkyWest Inc. or another buyer will likely succeed. He rates ExpressJet "Hold."
SkyWest shares fell 46 cents to $19.04.
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