With oil spiking, fears of a travel slump, and fears for the potential grounding of planes over the Iran war, airline stocks were hammered. In fact, for an idea of just how severe the airline stock pullback was, the US Global Jets ETF (JETS) dropped from about $31.33 to a low of $23.81. Worse, jet fuel costs are now up 81% since the conflict began and are now up 124% since Jan. 1. As a result, ticket prices are on the rise, with airlines passing the costs to customers.
In short, airline stocks aren’t in the clear just yet. However, analysts at Citi are still betting big on Delta Air Lines (DAL) and SkyWest (SKYW) for two key reasons. For one, according to analyst John Godyn, “The spike in fuel is extremely likely to weigh on all airline earnings in the short-term regardless of mitigating factors,” as quoted by Seeking Alpha. Two, both Delta and SkyWest are also the least sensitive to oil price shocks.
