Two traders tackled the issue on Tuesday as the group slipped over concerns about a fuel shortage resulting from this weekend’s cyberattack on a major U.S. pipeline.
The US Global Jets ETF (JETS), a basket of 39 airline stocks, ended Tuesday down more than 1.5%. It is down about 8% from its recent highs reached in March.
“Not all airlines are created equal,” said Nancy Tengler, chief investment officer at Laffer Tengler Investments.
“Southwest is in a unique position to come out of this stronger situation,” she told CNBC’s “Trading Nation” Tuesday, noting the “company’s strong history in hedging oil prices.”
Southwest has put in place hedges that pay off when crude oil prices hit $ 65 and $ 70-80 a barrel. Another “really aggressive hedging program” will start in 2022, Tengler said. Crude oil prices rose to just over $ 65 a barrel on Tuesday.
Southwest also announced it will start hiring new flight attendants for the first time since before the Covid pandemic put the economy on hold due to high demand.
“Once the pipeline is back on track, this is a company where you would want to profit from weakness because it will be a strong player in the medium to long term,” Tengler said. “Mainly leisure travel. There is no need to wait for business travel to return. We are owners and we would be buyers here. “
Southwest found another fan in Bill Baruch, founder and chairman of Blue Line Capital and Blue Line Futures.
“I am very bullish on crude oil. I think crude oil can hit $ 100 in the next 18 months and I think that’s going to be headwind for the airlines. The southwest is very good, very well positioned in this area given their hurdles, ”Baruch said in the same interview.
Having recently crossed a key trendline, the stock would be a buy on a pullback of around $ 54 per share, Baruch said, citing a chart.
Baruch’s other choice was the low cost carrier Spirit Airlines.
“I own Spirit Airlines and I love Spirit Airlines,” he said, adding that he would be “very hesitant” to invest in airlines other than Spirit and Southwest.
With travel resuming, consumers will likely be ready to shell out vacations in the coming months, Baruch said.
“I think Spirit Airlines will be well positioned to capitalize [on] “On a technical basis, I think you saw a good rally out of the hole here in Spirit. “
Spirit Airlines shares closed nearly 3% lower at $ 33.48 on Tuesday.
Disclosure: Tengler and Laffer Tengler Investments own shares of Southwest Airlines. Baruch owns shares of Spirit Airlines.