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FAA Cuts US Flights by 10%: Turbulence Ahead for Airline ETFs?
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The recent announcement by the Federal Aviation Administration (“FAA”) to reduce flight capacity at 40 major U.S. airports has sent ripples through the commercial aviation sector, causing major airline stocks like United Airlines ((UAL - Free Report) ), Delta Air Lines ((DAL - Free Report) ), and American Airlines ((AAL - Free Report) ) to slide on the bourses yesterday. This decision mandates progressive cuts, beginning with a 4% reduction and ramping up to 10% by mid-November to address safety concerns amid a prolonged government shutdown that has left air traffic controllers unpaid and air traffic control operations strained.
As one might expect, these cuts will result in reduced revenues for jet operators and could also affect their profitability. In a chain reaction, these flight cuts may also affect other market participants within the broader aviation industry, like those that manufacture aircraft parts and engines like RTX Corp. ((RTX - Free Report) ), shipping companies like United Parcel Services ((UPS - Free Report) ) as well as companies involved in providing aftermarket services like Boeing ((BA - Free Report) ).
Consequently, airline exchange-traded funds (ETFs) with significant exposure to such companies may face setbacks and should therefore remain on a smart investor’s radar at this time.
Will Airlines’ Recovery Stall After This Decision?
The commercial aviation industry was among the hardest hit by the COVID-19 pandemic, suffering significant declines in revenues and profitability. Finally, after losing about four years of passenger growth as a result of the pandemic (as reported by the International Air Transport Association in its 2024 Annual Review report), the industry has been witnessing a notable rebound in its profits over the past couple of years.
Spurred by a strong rebound in air travel demand and passenger volumes, as well as increased consumer confidence, airline revenues surpassed pre-pandemic levels throughout 2024 and into 2025.
Taking into account these catalysts along with declining jet fuel prices, the International Air Transport Association (“IATA”) provided a bright outlook for the airline industry, with expectations for its revenues to reach a historic high of $979 billion in 2025, reflecting a 1.3% rise from the 2024 level (as reported in its June 2025 outlook). However, in the current scenario, following the FAA’s flight cut decision, which could affect roughly 3,500 to 4,000 flights daily (as mentioned in a CNBC news report), this outlook seems far-fetched.
It is also imperative to mention that although airline profitability did improve in 2024 from the prior-year level, backed by solid passenger volume, the industry has been facing a few challenges since the beginning of 2025.
While persistent supply-chain disruptions continued to drive up the leasing costs for airlines, along with causing delays in new aircraft deliveries, global geopolitical uncertainties like the Russia-Ukraine war and trade disputes among nations have affected the industry in the first half of 2025. In particular, expanded tariff policies induced by the Trump administration and the retaliatory trade war have dampened air cargo and business travel demand.
So, in case the airline industry fails to generate the expected revenues by the end of 2025, the FAA flight cut decision will not be alone to blame.
Will Airlines Fly in the Long-Haul?
Considering the aforementioned discussion, it is reasonable to conclude that the looming flight reductions will impact the airline industry’s profitability in the fourth quarter of 2025.
However, the industry’s long-term trends, fueled by an expanding global middle class, increased air travel affordability, and the innate desire for connectivity, indicate that the demand for aircraft, parts, and, most importantly, air travel, remains set for sustained growth.
The Case for Airline ETFs
Given the long-term positive fundamentals amid a temporary setback from FAA flight cuts, airline ETFs offer a compelling opportunity for investors. In fact, the current dip in prices following the FAA announcement may present attractive entry points for those looking to capitalize on the industry’s recovery trajectory.
Smart investors should therefore keep an eye on the following airline ETFs, viewing the current volatility as a potential buying opportunity ahead of a rebound as operations normalize.
This fund offers exposure to companies across the globe with an emphasis on domestic passenger airlines. Its top three holdings include American Airlines (11.54% weightage in the fund), Southwest Airlines (11.35%) and Delta Air Lines (10.64%).
JETS gained 33.2% in 2024 but has lost 2.6% year to date.
This fund provides exposure to stocks of U.S.-listed companies that have operations relating to the airline industry, including airlines and aircraft and aircraft parts manufacturers, and companies engaged in the businesses of air freight and logistics, aircraft leasing and airline and airport operations. Its top three holdings include AAL (9.95%), RTX (9.69%) and United Parcel Service (9.45%).
JETU gained 38% in 2024 but has lost 20.4% year to date.
This fund offers exposure to U.S.-listed companies that have operations relating to the airline industry, including airlines and aircraft and aircraft parts manufacturers, and companies engaged in the businesses of air freight and logistics, aircraft leasing, and airline and airport operations. Its top three holdings include American Airlines (9.95%), RTX (9.69%) and UPS (9.45%).
JETD gained 51.7% in 2024 but has plunged 44% year to date.
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FAA Cuts US Flights by 10%: Turbulence Ahead for Airline ETFs?
The recent announcement by the Federal Aviation Administration (“FAA”) to reduce flight capacity at 40 major U.S. airports has sent ripples through the commercial aviation sector, causing major airline stocks like United Airlines ((UAL - Free Report) ), Delta Air Lines ((DAL - Free Report) ), and American Airlines ((AAL - Free Report) ) to slide on the bourses yesterday. This decision mandates progressive cuts, beginning with a 4% reduction and ramping up to 10% by mid-November to address safety concerns amid a prolonged government shutdown that has left air traffic controllers unpaid and air traffic control operations strained.
As one might expect, these cuts will result in reduced revenues for jet operators and could also affect their profitability. In a chain reaction, these flight cuts may also affect other market participants within the broader aviation industry, like those that manufacture aircraft parts and engines like RTX Corp. ((RTX - Free Report) ), shipping companies like United Parcel Services ((UPS - Free Report) ) as well as companies involved in providing aftermarket services like Boeing ((BA - Free Report) ).
Consequently, airline exchange-traded funds (ETFs) with significant exposure to such companies may face setbacks and should therefore remain on a smart investor’s radar at this time.
Will Airlines’ Recovery Stall After This Decision?
The commercial aviation industry was among the hardest hit by the COVID-19 pandemic, suffering significant declines in revenues and profitability. Finally, after losing about four years of passenger growth as a result of the pandemic (as reported by the International Air Transport Association in its 2024 Annual Review report), the industry has been witnessing a notable rebound in its profits over the past couple of years.
Spurred by a strong rebound in air travel demand and passenger volumes, as well as increased consumer confidence, airline revenues surpassed pre-pandemic levels throughout 2024 and into 2025.
Taking into account these catalysts along with declining jet fuel prices, the International Air Transport Association (“IATA”) provided a bright outlook for the airline industry, with expectations for its revenues to reach a historic high of $979 billion in 2025, reflecting a 1.3% rise from the 2024 level (as reported in its June 2025 outlook). However, in the current scenario, following the FAA’s flight cut decision, which could affect roughly 3,500 to 4,000 flights daily (as mentioned in a CNBC news report), this outlook seems far-fetched.
It is also imperative to mention that although airline profitability did improve in 2024 from the prior-year level, backed by solid passenger volume, the industry has been facing a few challenges since the beginning of 2025.
While persistent supply-chain disruptions continued to drive up the leasing costs for airlines, along with causing delays in new aircraft deliveries, global geopolitical uncertainties like the Russia-Ukraine war and trade disputes among nations have affected the industry in the first half of 2025. In particular, expanded tariff policies induced by the Trump administration and the retaliatory trade war have dampened air cargo and business travel demand.
So, in case the airline industry fails to generate the expected revenues by the end of 2025, the FAA flight cut decision will not be alone to blame.
Will Airlines Fly in the Long-Haul?
Considering the aforementioned discussion, it is reasonable to conclude that the looming flight reductions will impact the airline industry’s profitability in the fourth quarter of 2025.
However, the industry’s long-term trends, fueled by an expanding global middle class, increased air travel affordability, and the innate desire for connectivity, indicate that the demand for aircraft, parts, and, most importantly, air travel, remains set for sustained growth.
The Case for Airline ETFs
Given the long-term positive fundamentals amid a temporary setback from FAA flight cuts, airline ETFs offer a compelling opportunity for investors. In fact, the current dip in prices following the FAA announcement may present attractive entry points for those looking to capitalize on the industry’s recovery trajectory.
Smart investors should therefore keep an eye on the following airline ETFs, viewing the current volatility as a potential buying opportunity ahead of a rebound as operations normalize.
U.S. Global Jets ETF ((JETS - Free Report) )
This fund offers exposure to companies across the globe with an emphasis on domestic passenger airlines. Its top three holdings include American Airlines (11.54% weightage in the fund), Southwest Airlines (11.35%) and Delta Air Lines (10.64%).
JETS gained 33.2% in 2024 but has lost 2.6% year to date.
MAX Airlines 3X Leveraged ETNs ((JETU - Free Report) )
This fund provides exposure to stocks of U.S.-listed companies that have operations relating to the airline industry, including airlines and aircraft and aircraft parts manufacturers, and companies engaged in the businesses of air freight and logistics, aircraft leasing and airline and airport operations. Its top three holdings include AAL (9.95%), RTX (9.69%) and United Parcel Service (9.45%).
JETU gained 38% in 2024 but has lost 20.4% year to date.
MAX Airlines -3X Inverse Leveraged ETNs ((JETD - Free Report) )
This fund offers exposure to U.S.-listed companies that have operations relating to the airline industry, including airlines and aircraft and aircraft parts manufacturers, and companies engaged in the businesses of air freight and logistics, aircraft leasing, and airline and airport operations. Its top three holdings include American Airlines (9.95%), RTX (9.69%) and UPS (9.45%).
JETD gained 51.7% in 2024 but has plunged 44% year to date.