ETFs
Airline Profits Set to Soar as Travel Rebounds: ETFs in the Spotlight – June 5, 2024
Strong passenger demand and upwardly revised profit forecasts by global airlines paint an optimistic picture for the airline industry. Additionally, projections of increased international travel and an uptick in global passenger traffic, which has surpassed pre-pandemic levels, are propelling the sector’s outlook.
Increased revenue to support growth
According to Reuters, global airlines recently revised upwards their projections for 2024, estimating that revenues for the entire sector would be just under $1 trillion. According to the International Air Transport Association (IATA), cited by Reuters, the global airline industry is expected to make a profit of $30.5 billion in 2024, up from $27.4 billion last year.
The average amount paid by a passenger to fly a mile or passenger yield is expected to increase 3.2% from last year, according to IATA.
Along with the airline industry, the global travel and tourism market is also poised for substantial growth, with revenues expected to reach $927.30 billion in 2024. By StatistaGlobal travel and tourism is expected to grow at an annual rate of 3.47%, leading to a $1.06 trillion market by 2028.
Stimulate consumer spending
An increase in total demand, which is measured in revenue passenger miles, and the Fed’s new interest rate cut bets in 2024 have boosted consumer spending.
According to the CME FedWatch tool, the interest rate could fall to 5-5.25% in September, supported by a 52.6% probability. Lower interest rates could lead to an increase in consumer discretionary spending, strengthening the airline industry.
Passenger demand has been on the rise for 36 months, with total demand in April up 11% year-on-year. International demand increased by 15.8% compared to April 2023, according to IATA.
Sporting events to boost travel demand in Europe
Two major sporting events taking place in Europe in 2024 are expected to boost travel demand, attracting domestic and international tourists. The Olympic Games in France and the UEFA European Football Championship in Germany are expected to lead to a significant increase in tourism revenue, according to the European Travel Commission.
According to recent consumer data, travel is expected to remain a top priority in 2024, fueling strong consumer demand. Traveler spending is expected to increase 14.3% from 2023, reaching $742.8 billion in Europe this year.
Asia will remain a positive point
According to the Asia-Pacific Airlines Association, as quoted on Travel and Tour Worldinternational passenger traffic is expected to increase by 32% in April 2024, highlighting the strong growth in travel demand.
According to Reuters, IATA’s 2024 profit estimates for Asia have tripled to $2.2 billion. Demand from airlines in the Asia-Pacific region is expected to increase 32.1% year-on-year. by IATA.
Focus on ETFs
Below, we highlight a few ETFs that allow investors to increase their exposure to the airline market.
Global Jets US ETF (JETS – Free report)
The US Global Jets ETF seeks to track the performance of the US Global Jets Index with a basket of 51 stocks. The fund has amassed an asset base of $1.15 billion and charges an annual fee of 0.60%.
The US Global Jets ETF has double-digit exposure to Delta Air Lines (DAL – Free report) and United Airlines (UAL – Free report), with a share of 12.98% and 12.87%, respectively. The fund has gained 7.55% over the last three months and 11.39% over the past year.
ETF Themes Airlines (AIRL – Free report)
The Themes Airlines ETF seeks to track the performance of the Solactive Airlines Index with a basket of 31 securities. The fund has amassed an asset base of $0.5 million and charges an annual fee of 0.35%.
The Themes Airlines ETF has significant exposures to United Airlines and SkyWest (SKY – Free report), with 5.61% and 5.33% share respectively. The fund has gained 1.47% over the last three months.
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