When oil topped $51 a barrel Tuesday, its highest level in nearly four months, on fears OPEC might announce a reduction in supplies when it meets next month, it re-enforced money manager Leonard Mohr’s thinking that “you’ve got to be bonkers to own an airline stock, any airline stock.”

Although he’s convinced oil won’t hold at the $51 level very long, he believes uncertainty surrounding the direction of oil prices, coupled with swelling competition among the carriers, the increasing introduction of low fares, high operating costs, and a certain multibillion-dollar industry loss this year, provides a compelling case for shunning the airlines.

Mr. Mohr, president of Los Angeles-based MCR Associates, recalls that last year when JetBlue Airways was selling in the mid and high $20s, just about every airline analyst was pushing him to buy the stock. “A stock you’ve got to own” and “a once in a lifetime opportunity” were some of the go-go pitches he remembers.

Although he thinks JetBlue is the best of the lot, he never did buy the stock, as it turns out, a wise decision since it joined the other airlines and went south, wrapping up 2004 at a closing price of $23.22. The stock – which, in 2003, hit an all-time high of $47.14 – has continued to go south in 2005, skidding Wednesday to a 52-week low of $17.90. It’s currently trading at about $18.

Overall, airlines have been one of this year’s biggest losers, tumbling 14.9% after a 3% loss in 2004.

Money manager Raymond Stahler of London-based Stahler, Dearborn, Ltd., views every airline stock as a non-bargain despite the skidding prices. Aside from the uncertainties surrounding oil prices, he sees a series of wars developing, what with many airlines in hot water lowering their prices to lure more customers, and, in turn, their rivals matching or undercutting those fares to protect their surf. “The problem with wars,” Mr. Stahler said, “is people and companies die in them and that’s what’s inevitable in the airline industry.”

Clearly, fluctuating oil prices, at least over the near term, will have a lot to say about the bottom lines of airlines and their stock performances. Judging from Merrill Lynch’s views on the matter, look for even stormier weather on both fronts since every $1 a barrel move in the price of oil translates itself into a $450 million swing into the industry’s pretax profits.

Merrill’s energy team recently adjusted upward its oil price assumptions, which has prompted Merrill’s airline industry tracker, Michael Linenberg, to also adjust his numbers. He’s hiked his 2005 jet fuel forecasts from $40 to $45 a barrel and is using a price of $40 a barrel for 2006.

As a result, the analyst has raised his previously projected 2005 pretax industry loss from $1 billion to $3.4 billion. He has also reduced his earnings forecasts on 9 of the 18 carriers he tracks. In the case of 5 airlines, he sees losses for both 2005 and 2006. They are America West, AMR, Delta, Northwest and FLYi, Inc., the parent of low-fare airline Independence Air.

Mr. Linenberg looks for high oil prices to accelerate long overdue industry restructuring. That means, he believes, some carriers will be forced to retrench, while some may go out of business. He thinks formidable low-cost carries like buy-rated Southwest and JetBlue are best positioned to capitalize on the potential opportunities that arise from the industry disruption. Although he rates no major network carrier higher than neutral as an investment-meaning there are no buys in this sector – he views AMR, Continental and Northwest as best positioned to weather the industry storm.

In 1985, corporate raider Carl Icahn acquired control of Trans World Airlines and took over as chairman. At the time, he talked about how great the airline business was and predicted huge growth for the company. He was dead wrong. In 1992, TWA filed Chapter 11 bankruptcy proceedings. Mr. Icahn bailed out a year later and TWA’s assets were acquired by AMR In 2001.

Mr. Icahn’s thinking on the industry. “I’m glad I bailed out,” he told me. Considering what’s happened to the airlines over the last few years, many investors no doubt wish they had done the same.