Rising airfare costs won’t do any favors for travelers in the off-season, but it can certainly help set the Direxion Daily Aerospace & Defense Bull 3X Shares ETF (DFEN ) on a flight path to more gains.
Right now, the fund is up more than 20% to start the year, and increased revenues from the airline industry could certainly contribute to more bullishness. While it may seem that air travel would fall especially after the holiday hustle and bustle is over, it appears demand is still relatively strong. As a result, prospective air travelers are seeing higher prices.
“Higher airfare is in store this year as strong demand, even during the dead of winter, and limited capacity growth prompt airlines to flex their pricing power,” CNBC reported. “Fare-tracking platform Hopper this month said domestic ‘good deal’ U.S. airfare in January is at $304, up 12% over last year, with more domestic flights going for more than they did last year through at least June.”
Boeing is currently one of the top holdings in DFEN. That could benefit the bottom line in terms of revenue increases. And given their fourth-quarter results, that would be a boon. The company is facing challenges with operating cash flow, but it could be a short-term obstacle.
“Although we face near-term challenges, we took important steps to stabilize our business during the quarter including reaching an agreement with our IAM-represented teammates and conducting a successful capital raise to improve our balance sheet,” Boeing President and CEO Kelly Ortberg said. “We also restarted 737, 767, and 777/777X production, and our team remains focused on the hard work ahead to build a new future for Boeing.”
3x Defense Exposure
Another advantage of DFEN is its primary exposure to the defense industry, helping to prop up the commercial airline industry — namely, Boeing in this case — should it continue to falter. The push for increased defense spending adds an additional bullish element to the fund for added diversification.
DFEN tracks the Dow Jones U.S. Select Aerospace & Defense Index (DJSASDT). The index measures the performance of the aerospace and defense industry of the U.S. equity market. Aerospace companies include manufacturers, assemblers, and distributors of aircraft and aircraft parts. Defense companies include producers of components and equipment for the defense industry, such as military aircraft, radar equipment, and weapons.
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