Will JETS Soar as Labor Day Kicks Off Travel Season?

Will JETS Soar as Labor Day Kicks Off Travel Season?

The air travel ETF, grounded by the pandemic, has surged 25% so far this year.

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Reviewed by: Lisa Barr
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Edited by: Ron Day

The 2020 pandemic lockdowns that wreaked so much havoc on the globe’s health, culture and economy took particularly damaging aim at the air travel industry, nearly grinding airlines to a halt. 

Better days appear to have arrived as travel jumps and airlines struggle to keep up with demand.  

The U.S. Global Jets ETF (JETS) has experienced a double-digit percentage gain in 2023, and more gains could be on the horizon. The arrival of the Labor Day weekend, while marking the end of the summer travel season, also ushers in the start of a busy period for business travel.   

Air Travel ETF Holds Most Major Airlines 

The U.S. Bureau of Transportation Statistics reported U.S. airlines carried 194 million more passengers in 2022 than in 2021, up 30% year on year. In 2022, U.S. airlines carried 853 million passengers, up from 658 million in 2021 and 388 in 2020. In May, total airline revenues per passenger were 7.9% higher on a year-on-year basis. One-year per-passenger revenues from June 2022 through May 2023 were 13.5% higher.  

Meanwhile, U.S. Transportation Security Administration data shows that airport traffic has returned to prepandemic levels.  

The statistics point to higher earnings for the leading airlines.  

Three Reasons for Rising Airline Profits 

Three factors should lead to a continuation of growth in airline passenger demand over the coming months: 

  • Return to the workplace should lead to more business travel. Increased demand for expensive tickets in first and business class should add to airline revenues.  
  • The pandemic has faded into the rearview mirror as vaccines and less dangerous virus strains have turned COVID-19 into a far less serious condition. The fear of contracting the disease from travel has dramatically declined, leading to more air travel.  
  • The U.S. economy remains robust, with low unemployment and growth. While the Fed has dramatically increased interest rates to combat inflation, a recession seems less likely, and a soft landing is probable. Moreover, inflation has allowed airlines to raise fares and other travel costs as passengers expect to pay more for their next air ticket.  

Also, airlines have become more adept at pricing services and seating options, which are boosting sales and earnings. At the same time, employment costs have increased. Moreover, international fares remain high, but a rise in long-haul flight bookings suggests these customers are not price sensitive.  

JETS Owns the Leading Airline Stocks 

JETS portfolio is primarily in U.S. airlines: 

Top 10 Countries with JETS

Source: etf.com 

 

The chart shows an over 77% exposure to the U.S. airlines. JETS top holdings include: 

Top 10 Holdings with JETS

Source: etf.com 

 

In August 2023, JETS had over 41% of its assets invested in the top four U.S. airlines: Delta, Southwest, United and American Airlines. The diversified ETF owns shares in many of the world’s publicly traded air carriers, with small exposure to foreign airlines and travel booking sites.  

Fund Flows Are Negative 

At $19 per share on Aug. 25, JETS had $1.6 billion in assets under management. The fund trades an average of 2.68 million shares daily and charges a 0.60% expense ratio .  

The etf.com Fund Flows Tool shows a significant $649 million outflow since the end of 2022. Since June 30, $178 million has flowed out of JETS. 

Negative fund flows are not a bullish sign for the fund, but the trend remains bullish, which could mean investors have been taking profits after a significant rally since the March 2020 low and a double-digit percentage gain in 2023.  

Still, some money is flowing back in: Since Aug. 16, $37.5 million in new money has come into the ETF. 

The Trend Remains Bullish 

In March 2020, the pandemic caused JETS to decline to an $11.25 per share low. While the stock rose 158% to $28.98 in March 2021, it turned lower and fell to a higher $14.77 low in October 2022. Since then, the fund has been back on a bullish path. 

Total Returns 1-Year JETS

Source: etf.com 

 

The chart shows the pattern of higher lows and higher highs since October 2022. At $19 on Aug. 25, JETS was 28.6% higher than the October 2022 low and 11.2% above the December 2022 $17.08 per share closing price.  

Labor Day weekend traffic should be positive for airline revenues. However, an increase in business travel as the vacation season ends could turbocharge earnings for air carriers and JETS, which could have downside risk and significant upside potential over the coming months and years.  

Andrew Hecht is a Nevada-based writer and analyst covering stocks, bonds, foreign exchange, cryptocurrency and raw material markets. He has over four decades of experience in markets across all asset classes, concentrating on commodity markets. Hecht was a senior trader at Salomon Brothers in the 1980s and 1990s, running sales and trading businesses. In 2013, McGraw Hill published his book, “How to Make Money in Commodities."