Three Airline Stocks to Watch

Tuesday, 3 Jul 2007 | 1:59 PM ET

Airline stocks may be taking off -- despite such seeming drags as soaring fuel prices and bankruptcies. Andrew Wilkinson, senior market analyst at Interactive Brokers, told "Power Lunch" viewers why he sees a renaissance in passenger carrier shares.

Bullish on Airlines
Discussing why some investors are bullish on airline stocks and what stocks you should keep your eye on, with Andrew Wilkinson, Interactive Brokers sr. market analyst, and CNBC's Sue Herera.

Oil hit a 10-month high on Monday, but Wilkinson said that no longer spells financial doom for carriers: "The airlines have learned to hedge their fuel costs -- and are operating more efficiently than they have ever done," he said.

The analyst told CNBC's Sue Herera that carriers have used Chapter 11 bankruptcy protection as a tool, enabling them to revamp and reach that operating efficiency.

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Three carriers to watch:

Northwest Airlines. Wilkinson pointed to "extreme bullishness on the call-option side" during the second half of June. And the volume of call-buying for the once-bankrupt company was "absolutely huge," he said.

Delta Air Lines. The analyst said that the Atlanta-based carrier -- which had declared bankruptcy on the same day (Sept. 14, 2005) as Northwest -- also saw big activity in June's latter half. Wilkinson noted that 115,000 December-contract call options were bought.

JetBlue Airways. Perhaps due to high-profile weather-related problems, "there were a lot of long-standing bear positions on JetBlue puts." But Wilkinson said that "last week, when the [airline] sector was upgraded," a major investor "abandoned" its bear call.

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • Tyler Mathisen co-anchors CNBC's "Power Lunch." Mathisen also co-anchors "Nightly Business Report produced by CNBC."

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Kenny Polcari