Delta’s Blue Skies May Make JETS a Destination

Earlier this week, Delta Airlines raised its profit outlook, and described its customer demand as “strong.” 

Investors could be forgiven for skipping right past that news, given how many times airline stocks have disappointed them. But this is 2023, the heart of the post-pandemic travel era. This is the age of so-called revenge travel, where consumers around the globe are willing to travel at virtually any cost, to make up for an extended period of being mandated homebodies.  

That puts a notoriously difficult industry to invest in, airline travel, in the rare position of being, dare we say, in a momentum situation.  

There are a handful of travel-related ETFs for financial advisors and investors to choose from, but the most prominent in the space is the $1.8 billion US Global Jets ETF (JETS), a pure-play fund that invests solely in airline transport companies, with a heavy emphasis on commercial airlines. The fund debuted in 2015, and has endured some air pockets in the industry tied to its success.  

When business travel was virtually grounded in 2020, there was some concern about whether some of the industry’s members would even make it out the other end of the COVID-19 era. But with baby boomers leading the charge, Delta and its peers are back in the cockpit, at least for now. 

JETS vs Jets

JETS has rallied 23% this year, but 20% of that has been in just the past three months. And the ETF trades right around its price from the first quarter of 2020. In other words, JETS has made about the same amount of progress in the past three years as the NFL football team that shares its name. 

The ETF has a feature unique to its industry, in that it weights holdings based not only on market capitalization, but on passenger load. That still produces a very top-heavy portfolio, as just four of its 48 stock holdings comprise 40% of the JETS asset base. Those are the four major U.S. carriers: Delta, Southwest, American and United.  

Despite Delta’s optimistic announcement and the recent stock price rally, this is not an industry that has suddenly escaped years of negative profits (aka losses). JETS carries a price earnings ratio on trailing 12-month earnings of -160x. That’s not a misprint! And, at 3.6x book value, this is not to be confused with “high quality” investing.  

Still, with an encouraging chart pattern, growing hopes that consumers’ will to spend will transcend a Fed determined to crush inflation and economic excesses, the airline industry is showing signs it may be able to do more than roll along the tarmac as 2023 continues.