Airlines’ impressive ability to generate cash is one reason Warren Buffett shook off his long-standing aversion to the sector and recently unveiled stakes in several of the top holdings in JETS.
Gertsner is bullish on the recently controversial United, one of the largest holdings in JETS.
“So why United? Because they have the best fleet and network in the business, Gerstner says, but the worst margins, which leaves lots of room for improvements. The company also has the ability to deliver the balance sheet while continuing to spend on capex and buybacks. The end result: A much higher stock price (perhaps over $200 at the high end of the range, Gerstner said),” according to Barron’s.
Even Buffett called airlines “cattle cars,” noting that when passengers prioritize price, comfort and other amenities often go by the wayside. Recently, American Airlines (NASDAQ: AAL), another one of the largest holdings in JETS, said it is reducing coach class legroom.
For more information on airline ETFs, visit our Airline category.