Travel ETFs Soar as Delta Sees Greater Demand for Flying

Travel sector-related exchange traded funds jumped on Wednesday after Delta Air Lines Inc. (NYSE: DAL) projected rising profits in the current quarter as consumers satiate their wanderlust.

Among the best-performing non-leveraged ETFs of Wednesday, the U.S. Global Jets ETF (NYSEArca: JETS) advanced 4.8%, the Defiance Hotel Airline and Cruise ETF (CRUZ) increased 4.9%, and the SonicShares Airlines, Hotels, Cruise Lines ETF (NYSE Arca: TRYP) gained 2.1%.

Meanwhile, looking at airline stocks, Delta Air Line shares advanced 5.9% and American Airlines (NYSE: AAL) shares surged 9.9%. DAL makes up 10.2% of JETS’ underlying holdings and 5.6% of CRUZ’s. AAL makes up 10.8% of JETS, 3.8% of TRYP, and 2.6% of CRUZ.

Delta announced a smaller-than-expected quarterly loss after robust consumer demand helped provide “solid” profits in March and also allowed the company to offset soaring fuel costs with higher fares, Reuters reports.

Consequently, Delta provided a positive outlook, arguing that it could post “meaningful” profits this year. For the quarter through June, the airliner is estimated to generate an adjusted operating margin in the range of 12% to 14%, along with “strong” free cash flow. Additionally, revenue for the quarter is expected to rise by 14 to 18 points quarter-over-quarter.

“The demand environment that we have today is at a historic high,” CEO Ed Bastian told Reuters. “The last five weeks have been the strongest period of bookings that Delta has ever seen in our history.”

Delta has been able to pass along rising costs to travelers. While some analysts fear that rising fares and higher inflation could weigh on travel spending, the airliner contended that consumer demand has not waned in the least and projects demand to remain strong through the fall.

“Right now, I’m optimistic that our consumers will be in a very good place to continue to travel,” Bastian added.

“People have been cooped up for the last two years,” Bastian told CNBC. “They’re done investing in their homes and their garden and want to go see someone else’s garden for a change.”

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