On Monday the Qantas Airways Limited (ASX: QAN) share price was one of the worst performers on the S&P/ASX 200 index.
The airline operator's shares finished the day 4.5% lower at $6.11.
Why did the Qantas share price tumble lower?
Investors were quick to hit the sell button on Monday after drone attacks on key oil refineries in Saudi Arabia threatened to cut global supply and sent oil prices surging over 10% higher.
As fuel costs are the company's biggest expense, surging oil prices can be a major negative for an airline and weigh heavily on its margins.
Unsurprisingly, the shares of Air New Zealand Limited (ASX: AIZ), Alliance Aviation Services Ltd (ASX: AQZ), and Regional Express Holdings Ltd (ASX: REX) also dropped into the red.
Is this a buying opportunity?
If oil prices don't continue to surge higher from here, then I think this could prove to be a buying opportunity for investors.
I'm not alone with this view. According to a note out of Goldman Sachs, its analysts have reiterated their conviction buy rating and $6.53 price target on the company's shares.
The broker said: "We believe Qantas is one of the best placed global carriers to benefit from the recent volatility in global oil prices, given its: (i) fully hedged FY20 oil position, with downside participation; and (ii) strong track record of recovering fuel prices through effective capacity and price management."
It notes that Qantas "has a good track record of this, in FY19 having recovered A$594mn of its A$614mn yoy rise in fuel expense for FY19 via higher passenger ticketing revenues – effectively delivering pricing power of 97% per dollar cost increase in fuel expense."
In light of this, the broker continues to believe its shares are a buy and expects strong total returns over the next 12 months.
