With all the airlines’ woes, you’d think the transportation exchange traded fund (ETF) would be in the tank. But you’d be wrong.

Last week, the iShares Dow Jones US Transportation Average (IYT) closed at a record high. Trucking and rail has been picking up the slack for the fund, but the new heights attained by the fund can actually be attributed to the airlines this time around, thanks to an analyst upgrade. Gary Chase, an analyst for Lehman Brothers, bumped the sector to "positive," saying that the upside potential outweighed risks, reports Thomson Financial. IYT is up 15.9% year-to-date.

Daniel Michaels for the Wall Street Journal reports that the industry’s troubles haven’t gone global – yet. Despite cutbacks domestically, global carriers say their traffic is still strong. But the real test is yet to come as the summer travel season deepens. The uncertainty is largely because most people bought their tickets and made vacation plans months ago, and the more critical juncture will be at the end of summer.

The airline industry here is being hit by a number of factors, including the obvious problems of a weakening economy, higher oil prices and a weak dollar. The carriers here also fly some of the world’s oldest, most unreliable and least fuel-efficient jetliners. Carriers in other countries have long since upgraded, which has reduced their maintenance and fuel costs.

Well, as long as someone somewhere is getting a cheap flight…


For full disclosure, some of Tom Lydon’s clients own shares of IYT.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.