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Power Lunch

Three Airline Stocks to Watch

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

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.

Nothing But Blue Skies?

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.