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Airline stocks have bounced back strongly this week on a rebound in travel demand. This is especially true as the number of people going through airport security screening checkpoints hit a five-month high last weekend. Nearly 832,000 people screened across the country on Aug 9, up from 799,861 the week before per the Transportation Security Administration (TSA) data.
This is the first time that passenger numbers topped 800,000 since Mar 17, when the coronavirus pandemic hit passenger numbers. However, the new daily record number is down 70% over the same day in 2019 when about 2.5 million people were screened.
Given this, U.S. Global Jets ETF (JETS - Free Report) , the only ETF dedicated to the airline industry, surged 13% over the past six sessions, representing the longest such streak since the eight-day stretch ended Mar 13, 2018 (read: Best & Worst ETF Areas of July).
JETS in Focus
This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 40 securities with the highest concentration on the top four largest U.S. carriers, which collectively make up for nearly 38.3%. American firms account for 68.4% of assets while Canada, Mexico, China and the United Kingdom round off the next countries. The fund has gathered $1.3 billion in its asset base while sees a solid trading volume of nearly 5.9 million shares a day. It charges investors 60 bps in annual fees (see: all the Industrial ETFs here).
What’s In Store?
Despite the jump, the airline ETF is down about 44% this year. The resurgence in coronavirus infections across several states including Florida, California and Texas, once again put travelers off flying. For the last few weeks, passenger numbers have plateaued at around 20-25% of the pre-COVID-19 levels.
As such, air travel has a long way to go before reaching the levels seen before the pandemic. According to International Air Transport Association (IATA), the second half’s recovery in traffic has been slower than expected as global passenger traffic will not return to pre-crisis levels until 2024, a year later than previously projected (read: Top ETF Stories of July).
For 2020, global passenger numbers are expected to decline 55% from 2019 and worsen from the April forecast of a 46% decline. Slow virus containment in the United States and developing countries, lingering travel barriers, new restrictions in some markets and reduced corporate travel outlook are responsible for the downbeat outlook.
Further, the airline ETF has a Zacks ETF Rank #4 (Sell) with a High risk outlook, suggesting some pain in the near term.
However, the airline stocks will continue to gain momentum as the number of coronavirus cases showed a declining trend over the past couple of weeks. The progress in a potential coronavirus vaccine will add to the strength.
Russia became the first country to grant regulatory approval to a coronavirus vaccine, developed by Moscow's Gamaleya Institute. Though it needs to complete the final trials, Russian president Vladimir Putin expressed confidence that it would be in production before the year ends. Many U.S. biotech and pharma companies are also racing to develop a vaccine. In particular, Moderna Inc. (MRNA - Free Report) has inched closer to a vaccine as it began its phase 3 clinical trial on Jul 27 and the U.S. government has agreed to buy 100 million doses of an experimental vaccine. A vaccine will likely lead to higher air travel demand as people could travel freely without fear of getting infected (read: Late-Stage Coronavirus Vaccine Trials Begin: Biotech ETFs to Gain).
Further, the Trump administration supported the proposal for another $25 billion in federal aid to protect airline jobs. The previous $25 billion in government assistance to U.S. passenger carriers in the $2.2 trillion CARES Act provided in March would preserve the sector’s jobs through Sep 30. If the deadline expires, air carriers warned that more than 70,000 workers’ jobs will be at risk. The new proposal would extend those protections through the end of March 2021.
A combination of these factors is expected to push airline stocks and ETFs higher.
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Airline ETF Takes Off: Will The Surge Continue?
Airline stocks have bounced back strongly this week on a rebound in travel demand. This is especially true as the number of people going through airport security screening checkpoints hit a five-month high last weekend. Nearly 832,000 people screened across the country on Aug 9, up from 799,861 the week before per the Transportation Security Administration (TSA) data.
This is the first time that passenger numbers topped 800,000 since Mar 17, when the coronavirus pandemic hit passenger numbers. However, the new daily record number is down 70% over the same day in 2019 when about 2.5 million people were screened.
Given this, U.S. Global Jets ETF (JETS - Free Report) , the only ETF dedicated to the airline industry, surged 13% over the past six sessions, representing the longest such streak since the eight-day stretch ended Mar 13, 2018 (read: Best & Worst ETF Areas of July).
JETS in Focus
This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 40 securities with the highest concentration on the top four largest U.S. carriers, which collectively make up for nearly 38.3%. American firms account for 68.4% of assets while Canada, Mexico, China and the United Kingdom round off the next countries. The fund has gathered $1.3 billion in its asset base while sees a solid trading volume of nearly 5.9 million shares a day. It charges investors 60 bps in annual fees (see: all the Industrial ETFs here).
What’s In Store?
Despite the jump, the airline ETF is down about 44% this year. The resurgence in coronavirus infections across several states including Florida, California and Texas, once again put travelers off flying. For the last few weeks, passenger numbers have plateaued at around 20-25% of the pre-COVID-19 levels.
As such, air travel has a long way to go before reaching the levels seen before the pandemic. According to International Air Transport Association (IATA), the second half’s recovery in traffic has been slower than expected as global passenger traffic will not return to pre-crisis levels until 2024, a year later than previously projected (read: Top ETF Stories of July).
For 2020, global passenger numbers are expected to decline 55% from 2019 and worsen from the April forecast of a 46% decline. Slow virus containment in the United States and developing countries, lingering travel barriers, new restrictions in some markets and reduced corporate travel outlook are responsible for the downbeat outlook.
Further, the airline ETF has a Zacks ETF Rank #4 (Sell) with a High risk outlook, suggesting some pain in the near term.
However, the airline stocks will continue to gain momentum as the number of coronavirus cases showed a declining trend over the past couple of weeks. The progress in a potential coronavirus vaccine will add to the strength.
Russia became the first country to grant regulatory approval to a coronavirus vaccine, developed by Moscow's Gamaleya Institute. Though it needs to complete the final trials, Russian president Vladimir Putin expressed confidence that it would be in production before the year ends. Many U.S. biotech and pharma companies are also racing to develop a vaccine. In particular, Moderna Inc. (MRNA - Free Report) has inched closer to a vaccine as it began its phase 3 clinical trial on Jul 27 and the U.S. government has agreed to buy 100 million doses of an experimental vaccine. A vaccine will likely lead to higher air travel demand as people could travel freely without fear of getting infected (read: Late-Stage Coronavirus Vaccine Trials Begin: Biotech ETFs to Gain).
Further, the Trump administration supported the proposal for another $25 billion in federal aid to protect airline jobs. The previous $25 billion in government assistance to U.S. passenger carriers in the $2.2 trillion CARES Act provided in March would preserve the sector’s jobs through Sep 30. If the deadline expires, air carriers warned that more than 70,000 workers’ jobs will be at risk. The new proposal would extend those protections through the end of March 2021.
A combination of these factors is expected to push airline stocks and ETFs higher.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>