Airline sector-related exchange traded fund is beginning to gain speed, with United Airlines (NasdaqGS: UAL) shares break into new record highs.
The U.S. Global Jets ETF (NYSEArca: JETS), the only available pure-play fund that focuses on the global aviation industry, rose 1.1% Monday and gained 4.9% over the past month, trading back above its long-term trend line at the 200-day simple moving average after breaking out back in August.
Lifting the airline sector, United Airlines, the third-largest U.S. airline, has pushed through the rash of public relations problems and investors who were concerned that the carrier’s growth plan would trigger a fare war with competitors, CNBC reports.
UAL is the largest component in JETS underlying portfolio, making up 13.8% of the fund’s holdings.
Drastic Turnaround for United Shares
United shares have made a drastic turnaround, rising over 33% this year, even after falling off 11% in January and struggling through the second tense earnings call in a row.
“They were in the doghouse from the market’s perspective,” Jamie Baker, senior airline analyst at J.P. Morgan Chase, told CNBC.
Related: Airline ETF Takes Flight as Capacity Concerns Abate
While Delta Air Lines (NYSE: DAL) and American Airlines Group (NasdaqGS: AAL) reduced their profit outlook for the year in July, United was more optimistic and raised its estimates. United assuaged investors, stating that it was recovering most of the profit crunching surge in fuel costs through higher fares and other initiatives. The recent uptick in crude oil prices have contributed to rising costs in a period of improved demand.
“We think they’re back where they want to be,” Susan Donofrio, airline analyst at Macquarie, told CNBC.
JETS follows the U.S. Global Jets Index, which uses fundamental screens to select airline companies, with an emphasis on domestic carriers, along with global aircraft manufacturers and airport companies. Top holdings include United Continental, Delta Airlines, Southwest Airlines, American Airlines Group and Spirit Airlines.
For more information on the airline ETF, visit our Airline category.