The airline industry and related exchange traded fund are hitting some turbulence, but the sector outlook improves later this year.
The U.S. Global Jets ETF (NYSEArca: JETS), which tracks players in the global airline industry, dipped 2.9% Monday but rose 1.2% over the past month.
Along with mirroring the market sell-off in response to the Greece volatility, Airline stocks were further pressured after the targeted attack on the resort town of Sousse in Tunisia, the second attack on tourists in the country over recent months.
Consequently, European tour operators and airline stocks tumbled as cancellations mounted, reports David Cogswell for TravelPulse. However, while the attack tripped up the travel industry in Europe, the effects in the U.S. were less pronounced.
JETS includes a 76.4% tilt toward U.S. companies, along with 3.4% U.K., 2.3% Ireland, 1.1% Germany and 1.1% Greece.
Looking ahead, Cowen’s Helane Becker and team are waiting on Thursday’s traffic update from Delta Air Lines (NYSE: DAL) and the rest of the airlines will give guidance next week, reports Ben Levisohn for Barron’s.
“We expect similar trends in June as we saw in May, with load factors continuing to slip with the international segment leading load factors lower,” Cowen analysts said. “Given the difficult weather in late June we believe there is some upside to June PRASM expectations but are not expecting much in the way of significant improvement from previous guidance.”
PRASM, or passenger revenue per available seat mile, is an important measure of performance in the airline industry.
While airline industry may be struggling in the short-term, Becker anticipates improvements in the second half of the year, especially as companies enjoy low oil costs and increase domestic fares. [Greater Efficiency, Global Travel Demand Provide Tailwinds for Airline ETF]
“The outlook for the airlines continues to improve as the industry started raising fares in the domestic market and while cutting capacity,” Cowen added. “We expect all the ‘bad news’ in the shares to be reflected in the stocks after the June traffic releases. As investors look to 2H we expect airline shares to rise as oil prices have stabilized a bit in the $55 to $65 per barrel range, meaningfully lower than last year while managements make appropriate capacity reductions.”
U.S. Global Jets ETF
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Max Chen contributed to this article.
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.