Despite Recovery, Airline ETFs Face Obstacle | ETF Trends

Some exchange traded funds (ETFs) do better than others when oil prices are rising. Guggenheim Airline (NYSEArca: FAA) has not been one of them lately.

The timing couldn’t be worse. Predictions for more passenger traffic are better than they’ve been in awhile.

Airfare has already gone up four times this year, and the reason is rising oil prices. As the price of oil continues to shoot up, can the business ever take off again? [Airline ETF Poised For A Rebound, But…]

The industry is coping with it, but their way of coping might turn off customers. Jad Mouawad for The New York Times reports that the even the low-cost carriers are raising their rates to compete with the rising cost of service and fuel. The airlines have raised some of their fees, imposed summer peak-time surcharges and added hefty fuel surcharges on international flights. [Airline ETF Takes Off, But Oil Prices Could Ground It.]

Uncertainty in the oil markets is keeping airline shares and companies from taking off and gaining the recovery they’ve been seeking. Seats are still selling and flights are full, but to make a profit, the industry must raise rates to compete. Time will tell how long customers will accept this.

Tisha Guerrero contributed to this article.

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.