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Airline ETF in Focus on Strong Growth Forecast

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Rise in global economic growth has improved the prospects of the airline industry and the International Air Transport Association (IATA) expects stronger performance this year which can be attributed to strong passenger demand and improvement in the cargo sector.

The International Air Transport Association has forecast profits of $33.8 billion in 2018 which is slightly less than the previous year’s profits of $38 billion. North America will hold a large chunk of the global profit projected at $15 billion, followed by Europe at $8.6 billion and Asia at $8.2 billion. However, the African airlines are expected to lose $100 million.

Encouraging Fundamentals

Worldwide air passenger numbers are expected to grow to 4.3 billion in 2018. This is mainly due to enhanced security and better employment prospects. The solid outlook is also backed by expectations of higher airfares this year as Brent crude prices went up by 55% in the past year and touched a three-and-half year high in May (read: ETFs & Stocks to Fly High on Record Spring Travel).

Surge in the ecommerce sector has boosted global air freight demand in spite of higher fuel prices and trade tensions. The growth in freight volume is happening due to business trying to refill inventories and increasing demand in online shopping. The WTO anticipates commodity trade to grow at 4.4% in 2018, which will further benefit parcel firms like UPS (UPS) and FedEx (FDX) as well as jet traders and cargo pilots. Premium cargo services are expected to drive significant growth this year. Cargo growth is expected to be 4% in 2018 on increased cross border e-commerce business (read: 4 Best Performing Sector ETFs of May).

So, while the airline industry is on a solid growth path, many investors might look to benefit from these strong trends. Below we have highlighted an airline ETF which will help them ride on the favorable trends.

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

The fund provides has exposure to the global airline industry, including airline operators and manufacturers from all over the world and tracks the performance of the U.S. Global Jets Index. In total, the fund holds 33 stocks in its basket that are heavily concentrated within the top four firms whose allocations are touching approximately 12% each. The rest of the firms do not hold more than 4.5% shares.  It has an asset base of $99.5 million. The fund has a lower average daily volume of 39,300 shares. It charges an annual fee of 60 basis points and carries a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Best Sector ETFs of Last Week).

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