The Airline ETF’s Double Whammy
February 1st, 2011 at 2:00pm by Tom Lydon
Another blizzard is socking the Midwest and East Coast, the protests on the streets of Egypt are threatening to send oil prices higher. Can the airline exchange traded fund (ETF) stare down the pressure?
After reporting solid fourth-quarter results and ushering in a new era of optimism for the industry, airlines are starting to have a tough time again. In the last 10 days, Guggenheim Airline (NYSEArca: FAA) has lost 7%. Rising oil prices and travel interruptions can’t be helping much.
Oil prices topped $100 a barrel on Monday before pausing on Tuesday as investors watched developments in Egypt.
The risk here is if the protests go on much longer, the impact on oil prices could be huge for consumers and airlines alike, says ABC News. The biggest costs for airlines is in the form of fuel, and they’ll be passed along to travelers if they remain elevated for a long time. However, analysts have remarked that they can only pass along those costs so much before consumers just decide not to fly.
Meanwhile, flight cancellations are wreaking havoc. More than 4,500 flights today have been canceled; the total number of flights canceled is nearly 8,000.
Despite that, FAA has stood its ground in early trading, not making any big gains, but not losing anything, either.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.