Sector snap: Airline shares rally as oil retreats

The Amex Airline Index shot up 6.5 percent to 18.78 at midday. The broader market was largely flat, with the Dow Jones industrial average hovering at 12,039.31, up about a tenth of a percentage point.

Oil prices pulled back below $135 a barrel after China said it will raise fuel prices, potentially quelling demand in the booming Asian nation. Light, sweet crude for July delivery fell $2.82 to $133.86 a barrel on the New York Mercantile Exchange, but dipped more than $3 at times.

Airline shares often move opposite oil prices because fuel represents many carriers' biggest expense.

A day earlier, airline executives outlined plans to cut jobs and said they were considering tacking on even more fees as they struggle to cope with the unprecedented cost of fuel.

The chief executive of Continental Airlines Inc. said it would consider joining rivals American Airlines United Airlines and US Airways Group Inc. in charging customers to check a single bag.

Continental shares rose 90 cents, or 6.7 percent, to $14.34.

Shares of American parent AMR Corp., the biggest U.S. carrier, added 30 cents, or 5.5 percent, to $5.76. UAL Corp., the parent of No. 2 airline United, gained 43 cents, or 6.6 percent, to $6.98.

US Airways shares rose 17 cents, or 5.7 percent, to $3.18.