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JETS ETF to Gain on Lower Energy Costs, Consumer Resilience

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American Airlines (AAL - Free Report) announced on May 31, 2023, that it has raised its second-quarter profit forecast. This increase is attributed to lower jet fuel costs and strong travel demand. Despite concerns about a potential recession, travel during the Memorial Day weekend exceeded pre-COVID levels for the first time, indicating sustained resilience in the industry.

Take a Detailed Look Into the American Airlines’ Forecast

As per an article on CNBC, American Airlines provided an updated estimate on Wednesday, stating that their adjusted per-share earnings for the quarter are projected to range between $1.45 and $1.65. This represents an increase from their previous forecast of $1.20 to $1.40 per share.

Additionally, the airline anticipates unit revenues for the three-month period ending Jun 30 to be 1% to 3% lower compared to the same period last year, which is a better outcome than their earlier projection of a potential 4% decline.

The airline company anticipates that the average fuel price per gallon, inclusive of taxes, will range from approximately $2.55 to $2.65 for the second quarter. This represents a decrease from their earlier estimate of around $2.65 to $2.75.

We may take cues from American Airlines’ forecast. And it may so happen that other airlines may also follow suit in the coming days to realize the tailwind from falling energy prices.

Encouraging Consumer Numbers

Memorial Day air travel demonstrated resilience in consumer spending on trips, surpassing pre-Covid levels despite ongoing inflation concerns. Per CNBC, the Transportation Security Administration reported screening 9.79 million individuals from Friday to Monday, a slight increase compared to the 2019 holiday weekend. Setting a post-pandemic record, over 2.7 million people were screened on Friday alone.

Airlines for America research indicates that U.S. airlines are projected to transport a record-breaking 257 million passengers from Jun 1 to Aug 31, 2023, showcasing an unprecedented level of air traffic, as stated in AviationSource News.

Against this backdrop, below, we highlight the pure-play airlines ETF, U.S. Global Jets ETF (JETS - Free Report) .

ETF in Focus

U.S. Global Jets ETF seeks to closely track the performance of the U.S. Global Jets Index, providing exposure to airline companies across the globe with an emphasis on domestic passenger airlines. It has a basket of 48 securities.

JETS has exposure to the United States with 72.83% of the shares, followed by Canada (6.43%) and Japan (2.81%). JETS has gathered an asset base of $1.69 billion and charges an annual fee of 0.60%. The top holdings of the fund include companies like Delta Air Lines (DAL - Free Report) with 11.06%, American Airlines with 10.88%, Southwest Airlines (LUV - Free Report) with 10.891% and United Airlines (UAL - Free Report) with 10.7%.

The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook. It has generated 7.03% year to date but over the past year, the fund has lost 10.74%.

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