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Global Disruptions Put Travel And Airline ETFs In The Spotlight

Published 2022-06-27, 04:18 a/m

Around the Father’s Day and Juneteenth holidays in the US this month, thousands of flights were canceled creating what some dubbed a ‘travel Armageddon,’ impacting millions of travelers. The rest of the summer may not be much different, either.

For example, Delta Air Lines (NYSE:DAL) recently announced it was canceling around 100 flights daily between July 1 and August 7 to improve performance.

Smaller carriers, including JetBlue Airways (NASDAQ:JBLU) and Alaska Air (NYSE:ALK), have also introduced cuts to their summer flying schedules. Americans are now wondering whether they should expect extensive delays during the upcoming Fourth of July weekend.

Meanwhile, strikes at airports and other travel disruptions across Europe and the UK continue to affect many in that area. As a result, London-listed airlines including, British Airways owner IAG (LON:ICAG), easyJet (LON:EZJ) and Wizz Air (LON:WIZZ), have come under pressure.

Despite higher airfares, airlines have been enjoying robust travel demand. Still, they now face several challenges, including insufficient seating capacity and staff shortages.

Therefore, Wall Street has been reluctant to invest in travel shares. Year-to-date (YTD), the Dow Jones US Airlines Index and Dow Jones U.S. Travel & Tourism Index lost around 33% and 37%. By comparison, the S&P 500 Index and Dow Jones Industrial Average fell 17.9% and 13.3%.

Analysts debate how the travel industry may fare in the months ahead. Investors will be scrutinizing the upcoming quarterly metrics and forecasts from major airlines and other travel heavyweights.

With that information, here are two exchange-traded funds (ETFs) that may appeal to contrarian investors who now see opportunities in airlines and other travel industry shares.

1. US Global Jets ETF

Current Price: $17.42

52-week range: $15.89 - $25.47

Expense ratio: 0.60% per year

On June 20, the International Air Transport Association (IATA) upgraded its outlook for the airline industry’s 2022 financial performance. This year, revenues could increase by over 50% to reach $782 billion, and approach the 2019 levels before the pandemic became part of our lives.

Thus, first on today’s list is the US Global Jets ETF (NYSE:JETS), which mostly invests in airlines as well as aircraft manufacturers. The fund started trading in April 2015, and net assets stand at $2.6 billion.


JETS currently has 50 stocks where the leading 10 comprise more than half of the portfolio. Southwest Airlines (NYSE:LUV), American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL); Delta Air Lines, Spirit Airlines (NYSE:SAVE), Air Canada (TSX:AC) and Boeing (NYSE:BA) lead the names on the roster.

Over three-quarters of the companies are US-based. Then, we see names from Canada (5.2%), Japan (2.7%), Turkey (2.2%), and Brazil (2.0%), among others.

JETS is down 17.4% since January and 31.2% over the past 12 months. It hit a multi-year low on June 17. The price-to-book ratio for the fund stands at 3.96x.

If the $17.50 level does not provide support, we could see a further decline below $17. Potential investors whose portfolios can tolerate a bumpy road, could consider buying the dips in JETS.

2. SonicShares Airlines, Hotels, Cruise Lines ETF

Current Price: $3.66

52-week range: $3.42 - $5.35

Expense ratio: 0.75% per year

As more countries lift travel restrictions, many consumers are planning “revenge travel”, a way of making up for missed journeys during COVID-19 lockdowns. Metrics from Bank of America suggest: “Spending at airlines and travel agencies is up over 60% YoY.”

Next up on our list of funds is the SonicShares Airlines, Hotels, Cruise Lines ETF (NYSE:TRYP). It mainly invests in global airlines, hotels, and cruise lines. The fund was first listed in May 2021, and net assets are shy of $10 million. In other words, it is a relatively new and small fund without much trading history.

TRYP Weekly

TRYP currently holds a basket of 62 stocks, where the top 10 make up 45% of the fund. Meanwhile, North American shares comprise almost two-thirds of the portfolio, followed by Europe (17.5%), Asia / Pacific (15.8%), and Central and South America (0.7%).

Airlines have the largest slice in TRYP with 45.0%. Then come hotels, restaurants & leisure shares (39%), and equity real estate investment (17%).

Leading names include VICI Properties (NYSE:VICI), which owns casinos; Ireland-based Ryanair (NASDAQ:RYAAY); Singapore Airlines (SGX:SIAL); Southwest Airlines (NYSE:LUV); Hilton Worldwide (NYSE:HLT); and Norwegian Cruise Line (NYSE:NCLH).

Recent challenges have pushed TRYP down to a record low on June 17. The fund has lost roughly 21.1% year-to-date and 29.6% over the past 12 months. Readers looking to take advantage of increased travel demand could keep this thematic fund on their radar.

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