An Airline sector-specific exchange traded fund soared Thursday after United Airlines Holdings Inc. (NYSE: UAL) provided an optimistic outlook on this year’s profits. The U.S. Global Jets ETF (NYSEArca: JETS) advanced 2.7%.
Meanwhile, United Airlines shares were 9.2% higher. UAL makes up 11.3% of JETS’s underlying holdings.
United Airlines anticipates a return to profits in 2022 for the first time since before the coronavirus pandemic stunted travel demand as flight bookings increased and passengers sate their wanderlust, CNBC reports.
The positive outlook has been interpreted as a turning point for the broader airline industry as the economy continues to recover from the fallout from the Covid-19 pandemic. With falling new infection rates, many are beginning to step back outside and travel, and consumers don’t appear to be batting an eye to the higher ticket prices in the face of rising fuel costs.
“I’ve never seen in my career, and I’ve been in this industry a long time … such a hockey stick increase of demand,” CEO Scott Kirby told CNBC Wednesday, referring to business travel and leisure bookings.
For the second consecutive quarter, United is projecting a 10% operating margin and the highest quarterly sales in its history. The airliner is projecting revenue per passenger mile to increase 17% compared to pre-pandemic 2019, as higher fares mitigate an increase in expenses, notably in fuel prices.
“The airline has a bullish outlook on the future — bolstered by this persistent strength of demand and the fact that it is nearing 2019 operating margins — and once again reiterated confidence in its longer-term United Next targets of adjusted pretax margin of approximately 9% in 2023 and about 14% in 2026,” United said in a release. “This confidence is underpinned by the company’s current expectation to report a profit for the full year 2022.”
The optimistic turnaround for the rest of the year surprised many investors. According to FactSet, analysts, on average, were anticipating an annual loss of almost $900 million, or $2.52 a share, and a second-quarter loss of 17 cents a share heading before its quarterly statement, MarketWatch reports.
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