The airline industry has taken off in 2024, outpacing even the high-flying tech sector. The U.S. Global Jets ETF JETS, a fund that tracks the airline sector, is up 34% year-to-date as of Dec. 27, compared to the Nasdaq 100's 27% gain.
This surge reflects robust demand for premium travel, strategic operational shifts, and booming holiday traffic.
Travel Frenzy Lifts Airline ETF
Thanksgiving marked a pivotal moment for airline stocks this year. Over the six-day travel period, the TSA screened an estimated 18.3 million passengers—a 6% increase from 2023—pushing the JETS ETF up nearly 6% for November.
"As a pure consumer play, JETS is a way for investors to capitalize on peak holiday travel, which is expected to see records this year," recently said Kent Thune, research analyst at ETF.com.
The expert attributed the ETF's recent gains to declining fuel costs and strong seasonal demand. Since August, the JETS ETF has outperformed the tech-heavy Invesco QQQ Trust, Series 1 QQQ by robust 31 percentage points.
JETS' portfolio is heavily weighted toward U.S. airlines with 70% stake, including a 10% weight in American Airlines Group Inc. AAL and 8.5% in budget carrier Southwest Airlines Company LUV. The ETF also holds smaller positions in Boeing Co. BA, Expedia Group Inc. EXPE, and TripAdvisor Inc. TRIP.
Premium Demand Redefines Industry
Delta Air Lines Inc. DAL and United Airlines Holdings Inc. UAL, the second and fourth-largest U.S. carriers by market share, have been standout performers, surging 53% and 140% respectively this year. Together, they account for over 26% of JETS' holdings.
Despite facing cost pressures from rising pilot salaries and maintenance expenses, the airlines have thrived thanks to booming demand for premium travel options. Delta recently revealed plans to expand high-end services, projecting premium ticket revenues will surpass main cabin sales—a trend reshaping the industry's profit dynamics.
"Premium revenue trends have outpaced main cabin over the last several years," Catharine O'Brien, an analyst at Goldman Sachs, said.
"Airlines have disaggregated premium demand to serve more segments of premium demand from premium economy seats in the main cabin to lie flat business class, with premium international economy and domestic first class in between,” she said.
The analyst indicated that airlines with exposure to premium travel and strategic capacity improvements, including Delta, Alaska Air Group Inc. ALK, and United, are expected to outperform next year.
Chart: Airline Stocks Have Outpaced Large-Cap Tech In 2024
Leasing Market Tailwinds
Aircraft lessors like AerCap Holdings N.V. AER and Air Lease Corp. AL are also benefiting from tight supply and strong demand.
According to Goldman Sachs, higher lease extensions and gains on sales are boosting profitability, with analyst forecasting improved returns on equity for lessors in 2025.
“Looking into 2025, we expect many of the same themes to persist, with the drivers of aircraft availability mixed and unit cost inflation continuing, but decelerating,” O’Brien said.
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