Tag Archives: $JETS

Investors Brace For Bumpy Ride As Airline ETFs Hit A Rough Patch

After a hot take off for the ETF, JETS, MarketsMuse blog update profiles the plunge airline stocks and ETFs have seen in the recent weeks ahead the summer season, which will then hopefully bring another boost to the stocks and ETFs. This blog update is courtesy of Zacks Research article, “Air Stocks and ETF Plunge: Warming Up for Summer?”, with an excerpt below. 

The airline stocks that were hot and soaring over the past few years suddenly lost their altitude in Wednesday trading session as the shares of major carriers nosedived as much as 10% on concerns that growth might outpace travel demand. This could result in lower fares and thinner profit margins.

This is because cheap fuel is encouraging carriers to increase the number of seats at the current fares, breaking the competitive discipline that helped the industry to earn record profits in the past.

Bright Summer Outlook

Despite the brutal plunge, airline stocks and the ETF are anticipating sunnier days in summer. This is especially true given the optimistic view from the Washington-based trade group Airlines for America.

The group expects airlines to see the busiest summer ever this year buoyed by an improving economy, accelerating job market and rising consumer confidence. The demand for U.S. air travel would hit a fresh high as 222 million travelers (or 2.4 million a day) are expected to fly from June 1 through August 31, up 4.5% year over year and much higher than a record of 217.6 million travelers seen in 2007.

To continue reading about the airline stocks and ETFs that are bracing the bumpy ride, click here


CEO Believes The ETF, JETS, Will Have A Smooth Take Off

MarketsMuse blog update profiles U.S. Global Investors CEO’s, Frank Holmes, interview with Forbes’ Trang Ho. Frank Holmes’s company is launching a new airline ETF, JETS, tomorrow, Thursday, April 29, 2015. After so many past airline ETFs have crashed and burned, Holmes highlights how JETS is different. This interview is courtesy of Forbes’ article, “Why This CEO Believes New Airlines ETF Will Soar Even Though Its Predecessors Went Down In Flames” with an excerpt below. 

Frank Holmes, the CEO and chief investment officer of U.S. Global Investors, believes he can soar where others went down in flames. Holmes is launching a new airlines exchange traded fund on the stock market Thursday — U.S. Global Investors Jets ETF (JETS) — even though its predecessors were shuttled to ETF heaven for lack of investor interest. His San Antonio, Texas-based mutual fund firm oversees $927 million in assets.

Guggenheim Airline ETF (FAA), which rolled out in January 2009, was canceled in March 2013 after attracting only $21 million in assets. Direxion Airline Shares Fund (FLYX) was grounded in October 2011 only 10 months after take off. Its $3 million in assets were peanuts compared to the $25 million to $30 million needed for an ETF to break even.

Why did you launch this ETF?

Holmes: We believe the time is right for an airline ETF.  Thanks to wide-ranging structural changes in the airline industry, both domestic and international airlines are currently seeing strong growth in profits as well as demand. Although airlines have undoubtedly benefited from falling fuel prices—airlines’ single greatest operating expense—other important factors are also at work, which enable them to remain profitable in a highly competitive industry.

On a personal note, after flying more than 100 times last year, and over 8 million miles for the past 25 years, I noticed that all the new fees associated with flying began adding up. That’s when I thought to myself, if I can’t beat them, I might as well join them.

To continue reading this interview from Forbes, click here

An ETF For The Mile-High Club

MarketMuse update courtesy of Zacks.com from Nasdaq.

The U.S. aviation industry has been on cloud nine since the oil price succumbed to gravity.  Moreover, a pickup in the domestic economy, rising cargo demand, a boost to tourism and the subsiding Ebola scare put the industry in the top-performing category.  The sentiment around the sector was so bullish that Airlines rocketed to the highest level since 2001 in late December, per Bloomberg

Investors should note that the ETF industry was largely unable to reap the return out of this booming industry as Guggenheim closed the last airline ETF Guggenheim Arca Airline ETF (FAA) in 2013. Prior to that, Direxion Airline Shares ETF (FLYX) had also faced the same fate in 2011. However, to fill the void, a new airline ETF has been filed lately. The fund looks to trade under the name of U.S. Global Jets ETF (JETS) . 

The Proposed Fund in Detail 

The passively managed product intends to track the U.S. global Jets Index that considers worldwide airline companies, per the prospectus. The index attaches weight to the companies on the basis of the square root of their average daily volume seen in the trailing three months. The index looks to consider 25 to 40 airline stocks across the market. The product will charge 60 bps in fees. 

How Does it Fit in a Portfolio? 

The global aviation industry holds a steady outlook for 2015. The outlook is especially positive for the U.S. economy, with GDP growth gaining momentum. Consolidation benefits, growing travel demand and enhanced ancillary revenues also provide an impetus for growth. Other regions including the Middle East, Latin America & Africa and Asia-Pacific also hold promise. 

Several Gulf-based airlines continue to build up their positions within the global airline industry. Fleet development should improve over the coming years. Apart from the high demand from the oil rich Gulf nations, a major part of the fleet demand will be driven by China and India, and continuous expansion of low budget carriers around the world. 

If this was not enough, an unexpected plunge in oil prices turned out to be the real catalyst in propelling the industry. Airline profit outlook depends on fuel prices, the major variable component in the industry. The oil price drop of about 50% seen in 2014 is yet to turn around in 2015. In such a bullish backdrop, the upcoming airline ETF has every reason to be successful, if it gets approval

ETF Competition 

The road ahead for the proposed ETF is nothing but clear skies. The industry has long been waiting for such a product after the shutdown of the Guggenheim fund. While there are no direct competitors to the product, investors should note that two transportation ETFs, namely iShares Transportation Average ETF ( IYT ) and SPDR S&P Transportation ETF ( XTN ) have weight in the airlines industry. While IYT puts about 45% of its weight in the airlines, air freight & logistics sectors, XTN places about one-fourth of the fund in them

We expect the newly filed product to cash in on the underlying sector’s allure and find a solid following among investors. Nonetheless, the two transportation ETFs could eat into the proposed fund’s asset base because of the formers’ diversified approach to the transportation sector. Still, investors solely eyeing the global aviation industry would be satisfied by the proposed JETS ETF.