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Airlines' Profits Set to Take Flight as Travel Rebounds: ETFs in Focus

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Robust passenger demand and an upgraded profit forecast by global airlines paint an optimistic picture for the airline industry. Additionally, projections for an increase in international travel and an uptick in global passenger traffic, which surpassed the pre-pandemic levels, propel the prospects of the industry.

Surging Revenues to Help Growth

According to Reuters, global airlines recently revised their projections upward for 2024, estimating industry-wide revenues to marginally fall short of $1 trillion. Per the International Air Transport Association (IATA), as quoted on Reuters, the global airline industry is forecasted to earn a profit of $30.5 billion in 2024, up from the $27.4 billion profit earned last year.

The average amount paid by a passenger to fly one mile or passenger yields are anticipated to increase by 3.2% in comparison to last year, as per IATA.

Along with the airlines industry, the global travel & tourism market is also poised for substantial growth, with revenues anticipated to surge to $927.30 billion in 2024. Per Statista, global travel & tourism is expected to expand at a yearly pace of 3.47%, leading to a market size of $1.06 trillion by 2028.

Boost to Consumer Spending

A surge in total demand, which is a measure in revenue passenger kilometers, and renewed bets of interest rate cuts by the Fed in 2024 provided a boost to consumer spending.

According to the CME FedWatch Tool, the interest rate may fall to 5-5.25% in September, supported by a likelihood of 52.6%. A fall in the interest rate may lead to increased discretionary spending by consumers, thereby bolstering the airline industry.

Passenger demand has been on an uptrend for 36 months, with total demand in the month of April up 11% year over year. International demand saw a rise of 15.8% from April 2023, according to IATA.

Sporting Events to Drive Travel Demand in Europe

Two major sporting events of 2024 taking place in Europe are expected to drive travel demand, attracting domestic and international tourists. The Olympic Games in France and the UEFA European Football Championship in Germany are anticipated to lead to a significant surge in tourism revenues, according to the European Travel Commission.

According to recent consumer data, travel is expected to remain a top priority in 2024, driving robust consumer demand. Traveler spending is anticipated to surge by 14.3% compared to 2023, reaching $742.8 billion in Europe this year.

Asia to Remain a Bright Spot

According to the Association of Asia Pacific Airlines, as quoted on Travel and Tour World, international passenger traffic is estimated to surge by 32% in April 2024, highlighting strong growth in travel demand.

Per Reuters, profit estimations for 2024 by the IATA for Asia has trebled to $2.2 billion. Asia-Pacific airlines demand is expected to surge by 32.1% year over year, per IATA.

ETFs in Focus

Below, we highlight a few ETFs for investors to increase their exposure to the airline market.

U.S. Global Jets ETF (JETS - Free Report)

U.S. Global Jets ETF seeks to track the performance of the U.S. Global Jets Index with a basket of 51 securities. The fund has gathered an asset base of $1.15 billion and charges an annual fee of 0.60%.

U.S. Global Jets ETF has double digit exposure to Delta Air Lines (DAL - Free Report) and United Airlines (UAL - Free Report) , with a share of 12.98% and 12.87%, respectively. The fund has gained 7.55% over the past three months and 11.39% over the past year.

Themes Airlines ETF (AIRL - Free Report)

Themes Airlines ETF seeks to track the performance of the Solactive Airlines Index with a basket of 31 securities. The fund has gathered an asset base of $0.5 million and charges an annual fee of 0.35%.

Themes Airlines ETF has top exposures to United Airlines and SkyWest (SKYW - Free Report) , with 5.61% and 5.33% share, respectively. The fund has gained 1.47% over the past three months.

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