An airline exchange traded fund has fallen sharply on global growth jitters but is looking for a rebound as a major holding reports quarterly results.
United Continental (NYSE: UAL) is anticipated to report a healthy third quarter profit, possibly boosting the airline ETF.
The beaten-down fund also stands to benefit from any signs the economic picture is brightening.
“Real GDP may be revised up slightly. More importantly, however, another gain in durable goods orders is possible, given strong aircraft orders, in a further sign that third quarter economic growth should be positive and may well be stronger than growth in the first half of the year,” David Kelly, Chief Market Strategist for JP Morgan Funds, wrote in a weekly outlook.
The $17.3 million ETF, Guggenheim Airline ETF (NYSEArca: FAA), counts United as its second-largest holding at nearly 17% of the fund.
The ETF is down almost 21% for the year, due to a slowdown in the global economy and higher fuel prices. [Airline ETFs In Tailspin]
The Chicago-based airline is expected to post a $1.4 billion profit, with a $8.4 billion cash reserve, and a credit upgrade from Fitch Ratings earlier this month, reports Susan Carey and Jack Nicas for The Wall Street Journal.
The credit ratings company gave United Continental a B rating, up from B minus, and they are 5 ratings away from from becoming investment grade. [Airline ETF Falls on United Continental Outlook]
The coming months will be a test for the new company, which merged earlier this year. There are new labor contacts, a new reservations system, government approvals, and a pending lawsuit which will be dealt with.
Direxion Airline Shares Fund (NYSEArca: FLYX), an airline ETF, will stop trading as of October 10, 2011. [Direxion Grounds Airline ETF]
Guggenheim Airline ETF
Tisha Guerrero contributed to this article.