Airlines ETF Monthly Report: Key Takeaways
Airlines experienced a sell-off on 7th March led by many U.S. names like United Airlines, as the Russo-Ukraine War led to higher oil prices (the primary cost for airlines). Concerns over higher jet fuel prices could cut into Q1 profitability, reports Seeking Alpha. Analysts also warned that European travel demand could be lower in the summer due to macro factors and the war headlines. [1]
Travel demand has bounced back faster than expected, airlines said on 15th March. A welcome trend for the industry as carriers grapple with how much of a fuel-price surge they can pass along to customers, reports CNBC. Many are raising revenue outlooks including Delta Air Lines, which said ahead of an investor presentation that it expects first-quarter sales will be 78% recovered compared with 2019. [2]
One sign of a strong recovery in commercial airlines can be seen from recent announcements from Delta Air Lines (a top holding in the JETS ETF). CEO Ed Bastian said this month that he believes the “COVID era is over.” In addition, the carrier announced it would be giving most of its employees a 4% pay raise, the first such raise since before the pandemic. [3]
Macro Outlook
Higher oil prices continue to worry airline investors, but ancillary fees (charges for WiFi, food, and checked baggage), continue to bring in a significant revenue stream for airlines. Even though these fees fell in dollar terms due to the pandemic, they continue to represent a larger share of global airline revenue, which should help offset the rising cost of fuel.
The UK government removed all remaining COVID-19 international travel restrictions for passengers on March 18. This is a huge milestone for the airline industry as it continues to trek back to normalcy. [4]
On March 21, a China Eastern Airlines jetliner carrying 132 passengers crashed into the mountains in southern China’s Guangxi region, reports CNN. The cause of the plane crash is still under investigation, but the plane en route was a Boeing 737. While no fault has been found by the company, Boeing has indeed been trying to overcome a recent legacy of design and production troubles. [5]
Airlines ETF Performance Table (As of 31.03.2022)
|
|
1M
|
3M
|
6M
|
YTD
|
12M
|
SI
|
|
U.S. Global Jets UCITS ETF (Acc)
|
1.48%
|
3.20%
|
-7.49%
|
3.20%
|
NA
|
-15.28%
|
|
U.S. Global Jets Index
|
1.51%
|
3.46%
|
-7.11%
|
3.46%
|
-18.09%
|
-14.79%
|
Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/03/2022. Performance before inception is based on back tested data. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please note that all performance figures are showing net data.
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