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Airline ETF Rallies on a Slew of Positive News

Airline stocks have showed strength this week buoyed by rounds of positive news. First, the uptick in air travel demand led to a spike and then President Trump’s support for the industry’s federal aid program. Additionally, analysts’ upbeat view on some of the industry’s players spread optimism.

As such, U.S. Global Jets ETF JETS, the only ETF dedicated to the airline industry, has gained 4.4% over the past week (read: ETFs to Gain Despite Stalled Stimulus Talks).

JETS in Focus

This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 40 securities with the highest concentration on the top four largest U.S. carriers, which collectively make up for nearly 39.2%. Other firms account for no more than 4.5% of assets. American firms account for 68.4% of assets while Canada, Mexico, China and the United Kingdom round off the next countries.

The fund has gathered $1.6 billion in its asset base while sees a solid trading volume of nearly 5.1 million shares a day. It charges investors 60 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (see: all the Industrial ETFs here).

Latest Travel Demand Data

According to the latest Transportation Security Administration (TSA) data, an average of 738,038 people went through TSA travel security checkpoints each day for the week ended Sep 13. This is above the 715,145 daily average of the previous week, which includes most of the Labor Day holiday weekend.

Trump Support

Trump signaled his support for another $25 billion in federal aid to protect airline jobs and $135 billion for the Paycheck Protection Program. Trump tweeted “The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support.”

The 25 billion in federal payroll support passed in March has preserved the sector’s jobs until Oct 1. Now, with the expiration of the federal aid program, airlines have started furloughing their workers. Last week, American Airlines AAL, United Airlines UAL and other U.S. carriers began furloughing more than 32,000 workers. However, they would reverse the course if more aid was approved (read: Top ETF Stories of September).

Bullish Views

Most analysts have provided a bullish view on the air carriers. JP Morgan expects airline stocks to soar over the next year as they have enough cash to survive the decline in travel demand triggered by the COVID-19. Additionally, it believes a vaccine and rapid COVID-19 testing protocol for all passengers pre-departure of all flights could help boost demand for air travel. In particular, United Airlines and JetBlue Airways JBLU are set to rally nearly 50% from the Oct 6 closing price. JP Morgan upgraded both airlines to "overweight" with a price target of $52 and $17, respectively. United Airlines was rated neutral previously with a price target of $44 while JetBlue was assigned underweight rating with a price target of $12 by the bank.

BofA Securities raised the price target to $36 from $31 for Delta Airlines DAL, $55 from $50 for Alaska Air Growup ALK, $13 from $12 for JetBlue, $12 from $10 for Spirit Airlines SAVE and $147 from $130 for Allegiant Travel ALGT.

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JetBlue Airways Corporation (JBLU): Free Stock Analysis Report
Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
United Airlines Holdings Inc (UAL): Free Stock Analysis Report
American Airlines Group Inc. (AAL): Free Stock Analysis Report
Allegiant Travel Company (ALGT): Free Stock Analysis Report
Alaska Air Group, Inc. (ALK): Free Stock Analysis Report
Spirit Airlines, Inc. (SAVE): Free Stock Analysis Report
U.S. Global Jets ETF (JETS): ETF Research Reports
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