ETFs
Is it time for airline ETFs to forecast higher profits for 2024? – June 4, 2024
The International Air Transport Association (IATA) said on Monday that global airlines increased their profit forecasts for 2024, projecting industry-wide revenues of just under $1 trillion, thanks to a record number of travelers boarding flights. In particular, airline activity is often seen as an indicator of business or consumer confidence and trade.
The global airline industry is expected to generate $30.5 billion in profits this year, surpassing the upwardly revised forecast of $27.4 billion for 2023. This positive outlook is partly due to airlines maintaining controlling underlying labor costs despite recent strikes. $15.20compared to a global average of around $6.
Forecasts place airline ETFs as Global Jets US ETF (JETS – Free report) And ETF Themes Airlines (AIRL – Free report) on point.
Passenger and cargo performance expectations
Passenger yields, or the average amount a passenger pays to travel a mile, are expected to increase 3.2% from 2023 due to limited capacity growth. In contrast, freight yields are expected to fall by 17.5% in 2024, as freight markets return to normal patterns after a pandemic boom.
Recovering from pandemic losses
This prediction comes four years after the industry suffered a $140 billion loss in 2020 due to the pandemic. “The environment is better than expected, particularly in Asia,” Chief Executive Willie Walsh said at an annual meeting of IATA’s more than 300 members, who represent more than 80% of global air traffic. as quoted on Reuters.
Regional Profit Forecast
In Asia, IATA more than tripled its 2024 profit forecast to $2.2 billion, despite a slow recovery in international travel in China. North America remains the most profitable region, with a forecast of $14.9 billion, unchanged from previous forecasts, thanks to strong consumer spending despite high inflation.
A wall of worry?
The industry has warned that its ability to meet strong travel demand is being hampered by disruptions to global supply chains, including delays in fleet deliveries. Additionally, margins remain thin in the sector, with current performance still well below industry requirements. Unforeseen maintenance issues also pose challenges to the industry.
Focus on ETFs
US Global Jets ETF (JETS – Free report)
The underlying US Global Jets Index tracks the performance of airlines around the world, with an emphasis on domestic airlines. Delta Airlines (11.20%), United Airlines (10.57%) and American Airlines (10.41%) occupy the top three spots in the fund. The fund charges 60 basis points in fees. The fund is down 2.1% last month but gained 2.1% on May 31.
ETF Themes Airlines (AIRL – Free report)
The underlying Solactive Airlines Index identifies the 30 largest airlines by market capitalization. Ryanair Holdin (4.87%), Alaska Air (4.78%) and SkyWest (4.77%) occupy the top three places. The fund charges 35 basis points in fees. The fund lost 2.7% last month and is up 1.1% as of May 31.
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