ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Direct Indexing
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Thematic Investing Channel
  2. This Airline ETF Can Soar Once Again
Thematic Investing Channel
Share

This Airline ETF Can Soar Once Again

Aaron NeuwirthOct 03, 2019
2019-10-03

The U.S. Global Jets ETF (JETS C+), the only ETF dedicated to airline stocks, is up just 5.21% year-to-date, but the fund appears poised to rally in the fourth quarter.

The airline industry has enjoyed 10 consecutive years of profitability with net profits estimated at $35.5 billion for 2019, according to the International Air Transport Association. The profit growth comes despite the grounding of the Boeing 737, which accounted for less than 5% of daily flights in the U.S.

While there are favorable catalysts on the side of airlines that can positively affect the stocks over the near-term, some investors remain concern about the industry’s often volatile history.

“There has been plenty of reason for concern. Multiple bankruptcies, oil- price shocks, labor strife, and too rapid capacity growth are high on the list,” reports Al Root for Barron’s. “It wasn’t so long ago that Warren Buffett said the best way to become a millionaire was to start out a billionaire and buy an airline.”

Still, there are some positive factors to consider. Ancillary fees are another important and growing revenue stream for airlines. Specifically, these ancillary revenue cover additional charges beyond the airplane tickets, including additional baggage fees, change fees, in-flight wifi access, on-board food and services, car services and hotel booking, among others.

That Was Then…

Indeed, the airline industry has a turbulent history, but some of those factors are changing for the better, including profitability, cash flow and reduced correlations to oil prices.

“Oil prices don’t really matter for the sector,” according to Barron’s. “That may surprise investors. Energy prices are certainly important. The four major U.S. airlines have spent more than $140 billion on jet fuel over the past five years, about 20% of sales. That’s a lot, but everyone pays roughly the same amount for fuel, so as long as prices are stable, airfares adjust and no airline has a competitive advantage—or disadvantage.”

The airline industry is seeing greater opportunity to expand in international markets, especially in the developing economies where they may experience greater tourism, expansion of route networks and new aircraft orders. Air passenger demand is quickly rising as a growing middle-income class exhibits increased discretionary spending.

Related: An Airline ETF Could Help Investors Fly Through Turbulence

Over the past decade, airline management teams have done a good job of managing capacity, which if it grows too fast, can hinder profitability.

“Since the end of the financial crisis, growth in total airline capacity has lagged behind the increase in consumer spending 80% of the time. Modern airline management teams, it appears, are more concerned with margins than with market share,” according to Barron’s.

This article originally appeared on ETFTrends.com


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X