Tom Fitzgerald

"Delta... They have the most buffer. They own a refinery in Pennsylvania so that provides an operational hedge." While the broader airline industry suffers from spiking jet fuel prices, Delta's ownership of a physical refinery allows it to offset some of the fuel cost increases, giving it a structural margin advantage over its peers during energy shocks. LONG because Delta is uniquely positioned to weather an oil price spike better than other airlines. A severe drop in consumer travel demand due to a recession would hurt revenues more than the refinery hedge helps costs.

The airline industry is gentrifying with healthier fundamentals, credit card programs, deleveraging, and rational capacity. Delta and United are ahead of the group and offer longer-term upside for investors.

American Airlines is a buy. The industry can take price, and American can dramatically deleverage from 5x to 3x net leverage, offering a strong return opportunity. The company is pivoting to premium investments and growing internationally.

"American Airlines or Jetblue or Alaska. All three of those airlines have more sensitivity in their model to fuel prices for various reasons." These airlines lack adequate fuel hedges or physical refinery assets, making their profit margins highly vulnerable to the current spike in oil prices. SHORT because their unhedged exposure to rising fuel costs will severely compress margins and earnings. A rapid end to the Middle East conflict causing oil prices to crash would disproportionately benefit these unhedged airlines.

"American Airlines or Jetblue or Alaska. All three of those airlines have more sensitivity in their model to fuel prices for various reasons." These airlines lack adequate fuel hedges or physical refinery assets, making their profit margins highly vulnerable to the current spike in oil prices. SHORT because their unhedged exposure to rising fuel costs will severely compress margins and earnings. A rapid end to the Middle East conflict causing oil prices to crash would disproportionately benefit these unhedged airlines.

"American Airlines or Jetblue or Alaska. All three of those airlines have more sensitivity in their model to fuel prices for various reasons." These airlines lack adequate fuel hedges or physical refinery assets, making their profit margins highly vulnerable to the current spike in oil prices. SHORT because their unhedged exposure to rising fuel costs will severely compress margins and earnings. A rapid end to the Middle East conflict causing oil prices to crash would disproportionately benefit these unhedged airlines.