Airline stocks rose on Thursday as crude oil prices fell below $30 a barrel, even though the world's largest airline warned that first-quarter fuel costs will be higher than expected.
American Stock Exchange Airline Index
was up 2, or 2%, at 121 in late trading, as March oil futures fell more than 3% to an intraday low of $29.05 a barrel before bouncing back to close at $29.40, down 65 cents on the
New York Mercantile Exchange
The drop in oil prices helped buoy airline shares even after James Goodwin, chairman of
, parent of
, said he expected first-quarter fuel costs to hit $540 million, $40 million above previous estimates.
Shares of UAL were trading up 2 3/8, or 5%, at 54 3/8 by late afternoon Thursday. (The stock was still at 54 3/8 at the close Thursday.)
"This year so far airlines have been going in the opposite direction of oil prices," said Ray Neidl, an analyst at
. "It's an oil-driven market."
Leading airlines have warned that earnings would be hurt by higher oil prices and implemented fuel surcharges to offset those costs.
Oil prices have risen to a nine-year high as supply steadily dwindled, with inventories for the industrialized nations in the
Organization for Economic Cooperation and Development
down 1.7 million barrels a day in the fourth quarter.
But prices retreated Thursday after a Saudi Arabian official said prices would fall as winter fuel demand tapered off. Ali al-Naimi, Saudi Arabia's oil minister, said the optimal price for oil was at $20-$25 a barrel.
chairman, warned in testimony Thursday that high oil prices could hurt the American economy.
Airline stocks appear to have also benefited from
decision to partially do away with a steeply discounted business fare less than a week after announcing it.
Northwest said Wednesday that it had eliminated the BizFlex category except in major hubs after the competition did not match the 40% discount.
The new category offered a 40% discount off regular full coach fares on 10-day advanced purchase without requiring a Saturday night stayover. The lower fare, which was still about 10%-20% more than excursion fares that included a Saturday night stayover, was aimed at luring business travelers, who in many cases spend weekends away in order to take advantage of cheaper flights.
Shares of Northwest, the nation's fourth-largest airline, were up 3/8, or 2%, at 17 9/16 by midafternoon Thursday. (Shares remained at 17 9/16 at the close Thursday.)