United Continental (NYSE: UAL), Southwest (NYSE: LUV), Delta Airlines (NYSE: DAL) and American Airlines (NASDAQ: AAL) are the four largest holdings in JETS, combining for over half the ETF’s weight.
JETS has also been rising along with oil prices, a rare scenario for airline securities.
The ability of JETS and its holdings to rise in the face of rising oil prices, usually a major headwind, is undoubtedly impressive. It is also encouraging because some market observers believe oil prices can continue climbing.
Other catalysts include, renewed airline pricing power evidenced by higher ticket prices, and more fees paid per traveler, increased airline profitability, new aircraft program launches and continued demand for aircraft models and technology.
“Based on EPS upside, the Legacies American Airlines / United Continental (both OW) fare best due to lower margin profiles creating leverage to our PRASM and book tax assumptions. And from a FCF perspective, Alaska Air / Southwest Airlines (OW and EW, respectively) screen well based upon high cash tax bills and limited net operating losses, or NOLs,” according to the Morgan Stanley note seen in Barron’s.
For more information on airline ETFs, visit our Airline category.