Summer time is right around the corner, marking a time when millions of Americans takeoff and enjoy some well needed R&R. The increased travel could also translate to improved earnings for the transportation industry, namely airline stocks and related exchange traded funds.
“Summer is nearly upon us, and that means increased domestic and international air travel as American families go on vacation. The U.S. economy is humming, with unemployment below 4 percent and median household income on the rise, and so we anticipate yet another season of robust, profitable air passenger demand,” according to U.S. Global ETFs.
American airlines are expected to fly a record 236.1 million people between June 1 and August 31, an increase of 3.7 percent since last summer, CNBC reports.
“As the economy grows along with household net worth, passengers are taking advantage of persistently low airfares for their summer travel plans,” John Heimlich, vice president and chief economist at Airlines for America, told CNBC.
Why the Airline ETF is Taking Flight
A combination of relatively low ticket prices and a strong economy with high consumer confidence have convinced more it’s time to take flight for their summer hiatus. Meanwhile, in an attempt to meet that demand, airlines have added more flights. Airlines for America anticipates carriers will add an additional 116,000 seats per day this summer to accommodate the 96,000 additional daily passengers.
However, some are wary about rising fuel costs with crude oil at $70 per barrel. According to the U.S. Energy Information Administration (EIA), fuel costs continued to rise alongside oil during the quarter. Notably, kerosene-type jet fuel prices averaged $1.88 per gallon, up close to 8% from $1.74 in the December 2017 quarter, and up 25% from $1.50 in the first three months of 2017.