It’s a bird, it’s a plane, it’s…the airline industry? After getting dinged in the economic meltdown, it now looks like airlines and related exchange traded funds (ETFs) taxiing onto the runway and just about cleared for takeoff.
The airline industry has had its fair share of struggles as millions of Americans holed up in their homes for less-than-exotic “staycations” in lieu of expensive and time-consuming air travel. But are the industry’s fortunes changing?
- Durable goods orders rose 3% last month, primarily because of an uptick in aircraft demand. The 126% increase in commercial aircraft goods was one of the few bright spots in the entire report. Javier Hernandez for The New York Times reports that excluding volatile transportation and military orders, durable goods fell 2.9%. Clearly, business are still skittish about spending.
- Susan Carey for The Wall Street Journal reports that passenger revenue at U.S. airlines rose 1.4% in January compared with the same month a year ago. It appears that fewer seats and pricing strength are encouraging travelers to venture further than the homestead. [The Key to Airline ETF’s Success.]
Could Kevin Smith derail the ETF, though?
Michelle Higgins for The Wall Street Journal asks if the backlash from the Kevin Smith ordeal is hurting the airline industry. In case you missed it, Kevin Smith became a victim of Southwest Airlines’ (NYSE: LUV) policy about large passengers and was booted off the flight. Airlines are pointing their fingers at passengers who are too heavy to fly, and asking them to buy two seats. Regardless of which side of the debate you are on, shrinking airline capacity has aggravated the issue with passengers of all sizes facing more tightly packed flights and cramped seating. [Airline ETF: Ready for Takeoff?]
The airline industry’s troubles are not over. Consumers are feeling uneasy about the fact that joblessness has made no significant improvements. Until confidence returns, we could see hiccups along the way to health. Watch the trend lines to determine where opportunities might be. [How to Follow Trends.]
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- Claymore/NYSE Arca Airline ETF (NYSE: FAA)
- iShares Dow Jones Transportation Average (NYSEArca: IYT): holds primarily rail and shipping companies, but airlines are held in this fund in small allocations.
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.