The domestic airline industry continues to recover from the worst global health crisis in 100 years. The number of daily U.S. commercial air passengers processed by airport security hit a new pandemic-era milestone on Sunday, October 18, exceeding 1 million.
Not only is that greater than the traffic during the busy Labor Day weekend in early September, but it’s the highest daily posting since March.
Airline stocks responded positively to the news on Monday. The U.S. Global Jets Index jumped as much as 2.62 percent in intraday trading before giving back some.
We’re optimistic that airline bookings could recover even further in the coming days and weeks, especially now that new research appears to show that air travel may be much safer than initially thought.
According to the Department of Defense (DoD), which researched the spread of particles in airline cabins over a six-month period, mask-wearing passengers are at “very low” risk of being infected with the coronavirus, even on a packed flight. That’s thanks not only to the mask but also modern aircrafts’ superior air filtration system.
Flying isn’t completely risk-free, of course, but this is excellent news for travelers and carriers alike, not to mention shareholders. A recent survey by Travel Leaders Group found that 70 percent of Americans and Canadians were planning on taking a vacation in 2021, and of those, nearly half said they would be flying. We believe the DoD’s study may help alleviate any lingering concerns they still might have.
Chinese Domestic Passenger Traffic Recovering Ahead of International Traffic
Domestic air travel in China—currently the world’s largest aviation market—may have already recovered to levels last seen before the pandemic, according to the International Civil Aviation Organization (ICAO).
In an October 8 presentation, the agency shows that domestic passenger traffic in China, having bottomed in mid-February, is now above 2019 levels in terms of capacity. The number of seats on domestic commercial flights climbed safely above 2 million per day in the first week of October, ahead of airlines’ offerings a year ago.
The pandemic has impacted airline equities across the globe, but the dip has been less severe in China, which has managed to limit the virus’s spread. The Chinese economy expanded 4.9 percent annually during the quarter ended September 30, making it the only country so far to report growth during the pandemic.
Although shares of China Southern Airlines, the largest carrier in Asia by passengers served, and China Eastern Airlines were down 20.4 percent and 23.7 percent year-to-date as of October 16, that was about half as much as the decline in the Bloomberg World Airlines Index, down 40 percent over the same period.
U.S. Global Jets ETF (JETS) Exceeds 100 Million Shares Outstanding
We believe one of the most attractive ways to play the economic recovery from the pandemic is with global airline stocks. From its low on May 15, the U.S. Global Jets Index has already recouped 51 percent as of October 20. It’s still 44 percent below its all-time high on January 17 of this year, so there may still be time to participate.
For investors seeking a pure-play airlines ETF, the only option is the U.S. Global Jets ETF (JETS), which invests in not only carriers across the globe but also airport services companies and aircraft manufacturers.
Since airline share prices dropped in March due to the pandemic, we’ve seen demand for JETS surge. In early June, assets under management (AUM) in our smart beta 2.0 ETF crossed above $1 billion, following 70 straight days of inflows.
JETS hit another milestone on October 14 when it exceeded 100 million shares outstanding for the first time. This is meaningful because it shows growing demand for the ETF, leading to the creation of new shares.
Free Registration for Upcoming Webcast
Interested in learning more about JETS? You’re in luck! U.S. Global Investors CEO and Chief Investment Officer Frank Holmes will be discussing JETS and the airline industry during an upcoming webcast cohosted by Kevin O’Leary, chairman of O’Shares ETFs and venture capitalist on the hit TV show Shark Tank.
The webcast will be held on Thursday, October 29, at 11:00 am Eastern standard time.
To register for FREE, click here or the button below. We hope you’ll join us!
The Bloomberg World Airlines Index is a capitalization-weighted index of the leading airlines stocks in the World.
Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices. Smart beta emphasizes capturing investment factors or market inefficiencies in a rules-based and transparent way.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
The outbreak of the COVID-19 pandemic and the resulting actions to control or slow the spread has had a significant detrimental effect on the global and domestic economies, financial markets and industries, including airlines. U.S. Global Investors continues to monitor the impact of COVID-19, but it is too early to determine the full impact this virus may have on commercial aviation. Should this emerging macro-economic risk continue for an extended period, there could be an adverse material financial impact to the U.S. Global Jets ETF.
Past performance does not guarantee future results. Index performance is not indicative of fund performance. To obtain fund performance, visit www.jetsetfs.com.