Airlines are hurting, and even though they’re a small component of the transportation exchange traded fund (ETF), continued troubles could eventually manage to weigh down on the fund.
American Airlines (AMR) announced this morning that they’re cutting jobs, retiring planes and charging passengers to check baggage. The world’s largest airline is cutting domestic capacity by 11% to 12% in the fourth quarter, its biggest cutbacks since the attacks of Sept. 11, 2001, reports Kyle Peterson for Reuters.
Fuel prices are a major factor in the woes of airlines. Oil shot past a new record of $133 on Wednesday after the Energy Department reported a decline in inventories, says Madlen Read for the Associated Press.
American will begin charging a $15 fee for the first checked bag in mid-June. Rival airlines are considering charging for checked baggage, as well.
As the airline industry works to find a solution to their problems, the transportation ETF has actually been delivering. Its top components are primarily made up of trucking, railroad and shipping companies. It’s up 18.1% year-to-date.
For full disclosure, some of Tom Lydon’s clients own shares of IYT.
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