Investors might be wondering which airlines are positioned to suffer the smallest blow from the drop off in travel. Barron’s points out that JetBlue could be impacted by less than other carriers due to two key factors: 1) It does not fly the grounded 737 MAX jet, and 2) It does not have direct exposure to Asia.
The Boeing 737 MAX jets have been grounded for over a year, which has negatively impacted carriers that fly the plane, as they’ve had to cancel flights and make arrangements to use other jets. When the coronavirus broke out in January, mostly in China at first, flights in and out of the country were cancelled and eventually most flights in Asia. For this reason, carriers that don’t have exposure to Asia were likely less impacted by the loss of revenue.
“The 737 MAX and more recent coronavirus headwinds have not gone away…the airline industry is now looking relatively cheap to the rest of the market and JetBlue appears to be the best breed of these stocks,” writes Daren Fonda in a Barron’s article dated February 7, 2020.
Airline stocks in the S&P 1500 have the lowest price to earnings ratio of any subsector on the market, according to a note by Bespoke Investment Group and as reported by Barron’s. As of February 7, the U.S. Global Jets ETF (JETS) had a price to earnings ratio of 8.8 – much cheaper than the Industrial Select Sector SPDR ETF (XLI) at 23 times earnings. Additionally, JetBlue is the fifth largest holding in JETS, which focuses on domestic carriers.
Learn more about the JETS ETF and why now might be a good time to gain exposure to the airline industry.
U.S. Global Investors has authored and is responsible for the summary on this page. All opinions expressed and data provided are subject to change without notice. Opinions are not guaranteed and should not be considered investment advice.
The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings. The S&P 1500, or S&P Composite 1500 Index, is a stock market index of US stocks made by Standard & Poor’s. It includes all stocks in the S&P 500, S&P 400, and S&P 600. This index covers approximately 90% of the market capitalization of U.S. stocks.
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.