The U.S. Global Jets ETF (JETS) is on a winning streak, soaring 51.65% over the past year. This impressive performance is fueled by the strong gains of its top holdings, including airline giants Delta Air Lines Inc. (DAL) and Southwest Airlines Co. (LUV). The ETF recently made a Golden Cross, a bullish signal often interpreted as a sign of more upside to come.
The Golden Cross occurs when the 50-day simple moving average (SMA) crosses above the 200-day SMA, indicating a shift in momentum. In the case of JETS, the 50-day SMA at $19.95 has crossed above the 200-day SMA at $19.71, suggesting a positive trend for the ETF.
The airline industry is experiencing a resurgence as travel demand rebounds from the pandemic. JETS has been particularly successful in 2023, up 20.33% year-to-date, largely thanks to the stellar performance of United Airlines Holdings Inc. (UAL), another top holding. United recently hit a 52-week high after exceeding third-quarter earnings expectations with $3.33 per share and $14.84 billion in revenue. Despite a slight dip in revenue per available seat mile (RASM), United’s future outlook remains positive with a robust $3.4 billion in free cash flow year-to-date. United’s strong performance, with an 83.64% year-to-date rise in its stock price, has contributed to the overall success of the JETS ETF.
However, the path ahead might not be as smooth for all airline stocks, particularly Delta and Southwest.
Delta Air Lines has faced some turbulence recently. A costly technology outage during the summer, involving cybersecurity companies CrowdStrike Holdings Inc. (CRWD) and Microsoft Corp. (MSFT), wiped out $380 million in revenue. Despite this setback, Delta reported $15.68 billion in revenue for the third quarter, although this fell short of analysts’ expectations. Delta is hoping for a strong holiday season to boost fourth-quarter earnings, projecting revenue growth between 2% and 4%. However, looming election uncertainty and concerns about the company’s capacity to handle future tech failures might hinder its progress.
Southwest Airlines, on the other hand, delivered an unexpected earnings beat in the third quarter, posting 15 cents EPS against breakeven forecasts. Revenue also surpassed estimates at $6.87 billion, fueled by strong travel demand. Despite these positive results, Southwest’s stock dipped due to concerns over potential delays in Boeing Co. (BA) deliveries, raising uncertainties about its future growth. Southwest also entered into an agreement with activist investor Elliott Investment Management, which could lead to strategic changes. The airline’s cautious stance on Boeing delays might create short-term turbulence, but long-term investors may want to hold on for potential future gains.
As the fourth quarter unfolds, investors in JETS and individual airline stocks will be closely watching the industry’s performance. Will strong travel demand be enough to offset the headwinds facing Delta and Southwest? Can the industry’s investments in infrastructure, technology, and partnerships with companies like Microsoft pave the way for smoother skies in 2025? The airline industry is full of drama, with Delta battling outages, Southwest navigating Boeing uncertainties, and United soaring ahead. For now, investors need to buckle up and prepare for what could be a bumpy ride.