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Time for Airlines ETF (JETS)?

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U.S. Global Jets ETF (JETS - Free Report) is off 11.3% this year and is up 5.5% past month. Though the fund underperformed the S&P 500 (up 8%) past month, the losing trend might reverse soon. Travel ETFs will likely surge on optimism that consumers will continue flying this year in the holiday season despite higher fares. If this was not enough, Airlines will likely return to profitability in 2023, per IATA data.

The airline industry will become profitable again next year for the first time since 2019 as recovery in air travel continues following nearly two years of COVID-19 restrictions, per IATA, reported by Reuters. The International Air Transport Association (IATA) now expects a net profit of $4.7 billion for the industry next year, with more than 4 billion passengers look to fly.

IATA had previously said only that profits were "within reach" in 2023. For 2022, IATA narrowed its forecast for industry-wide losses to $6.9 billion from $9.7 billion. A ‘huge surge in travel’ this holiday season is expected this holiday season, per economists, as quoted on Yahoo Finance. In 2020 and 2021, holiday travelling was under pressure due to heightened fear of COVID-19. Thanksgiving and Christmas are normally two of the most traveled holidays in the fourth quarter.

According to Hopper's 2022 Holiday Travel Outlook released in September, the average price of a domestic plane ticket is $463 for Christmas travel. Christmas airfares are currently averaging 31% higher than in 2019, and 39% higher than last year. International airfare is currently $1,300 per ticket this year for Christmas, an increase of 26% compared to 2019, and 20% compared to 2018. International airfare will rise on average as the holidays come closure.

IATA’s forecast is based on a gradual reopening of China to international traffic and the easing of its own zero-COVID policy. If that does not happen, airlines' profitability would be affected. Another risk for the 2023 outlook is that some economies fall into recession, it said. These data points make JETS a compelling buy.

ETF in Focus

The $2.24-billion-fund holds about 30 stocks in its portfolio and is concentrated on a few individual securities. The product charges 60 bps in fees. United Airlines Holdings (11.53%), Delta Air Lines (10.75%) and Southwest Airlines Co (10.09%) round the top three spots in the fund.


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