Lower oil boosts airlines

NEW YORK (Reuters) - Lower oil prices boosted the broad airline sector on Tuesday, but major airlines stood out after an analyst noted their share prices were likely to outperform those of discount carriers.

The Arca Airline Index .XAL rose 1 percent in afternoon trading on the New York Stock Exchange as Continental Airlines CAL.N, gained nearly 7 percent, or 69 cents, to $10.81.

Hawaiian Holdings Inc (HA.O), parent of discount carrier Hawaiian Airlines, lost more than 12 percent, or 90 cents, to $6.19.

Morgan Stanley analyst William Greene said airlines such as Continental, Delta Air Lines (DAL.N) and American Airlines parent AMR Corp AMR.N could benefit from bottoming revenue trends.

"Legacy airlines are highly depressed due to liquidity concerns across the space," Greene wrote Tuesday. "However, consistent with our recent work, we see little risk of a major, negative revision in investor expectations in the near term."

The sector was also bolstered by a more than 2 percent drop in oil prices. Jet fuel tends to make up around 30 percent or more of carriers' costs, said Helane Becker, an analyst with Jesup & Lamont.

Delta gained 4 percent, or 26 cents, to $6.46, while American added 3.7 percent, or 17 cents, to $4.79.

Southwest Airlines (LUV.N) shares edged up 1 cent to $7.43, while JetBlue Airways Corp (JBLU.O) fell nearly 1 percent, or 5 cents, to $5.05.

(Reporting by Deepa Seetharaman; editing by Gunna Dickson)