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ETF Investing

The Top 3 Airline ETFs to Watch

Airline ETFs benefit from increased air travel.

There are plenty of reasons to invest in airline ETFs. The airline industry is relatively undervalued, and with more people flying than ever before, the potential for growth is huge.

Roughly 44,000 flights take off every day in the U.S. And last year, U.S. airports serviced around 1 billion passengers. Internationally, that number is closer to 4 billion. With fares becoming more affordable, airlines are serving more passengers and posting bigger profits

The International Air Transport Association estimates the airline industry will net $35.5 billion in profit this year. They also project the number of passengers will increase to 8.2 billion by 2037.

Airline ETFs are a great way to gain exposure to the growth of the airline industry. Plus, you aren’t vulnerable to the losses of any particular airline stock. On the whole, the airline industry has been tremendously profitable. In fact, it has been profitable for 10 straight years. And the airline industry should continue that profitable trend.

Any investor would be wise to track the airline industry. And with airline ETFs you can maximize your exposure and minimize your risk. Specifically, these are the top 3 airline ETFs to watch in 2019:

Airline ETF to Watch No. 3: iShares Transportation Average ETF (BATS: IYT)

  • Issuer: iShares
  • Net Assets: $517 million
  • YTD Performance: +14.81%
  • Expense Ratio: 0.43%
  • Price: $182

The iShares Transportation Average ETF tracks the Dow Jones Transportation Average index, and a few other transportation stocks selected by the Dow Jones Average Committee. That means it has exposure to the railroad, freight, trucking and marine sectors in addition to the airline sector. The airline sector makes up about 18% of the ETF.

The iShares Transportation Average ETF includes some of the best airline stocks around: Southwest Airlines (NYSE: LUV), Alaska Air Group (NYSE: ALK), United Airlines (Nasdaq: UAL), Delta Air Lines (NYSE: DAL), American Airlines (Nasdaq: AAL) and JetBlue Airways (Nasdaq: JBLU).

Since its inception in 2003 this ETF has outperformed the benchmark by 10%. With a low expense ratio and a large range of assets, the iShares Transportation Average ETF is a solid airline ETF.

Airline ETF to Watch No. 2: U.S. Global Jets ETF (NYSE: JETS)

  • Issuer: U.S. Global Investors
  • Net Assets: $51 million
  • YTD Performance: +2.62%
  • Expense Ratio: 0.6%
  • Price: $28

The U.S. Global Jets ETF is the only ETF that exclusively tracks airlines stocks. It’s a newer fund having only been on the market since April 30, 2015. This is the fund for you if you want to narrow your focus on airline companies like Delta or United. This ETF consists largely of airline company stocks, but also tracks aircraft manufacturers, terminal services and airports.

Delta Air Lines makes up the largest percentage of the fund at nearly 13%. Its other top holdings include: United Airlines, Southwest Airlines, American Airlines, Allegiant Travel (Nasdaq: ALGT), Alaska Air (NYSE: ALK), JetBlue Airways, Spirit Airlines (NYSE: SAVE) and General Dynamics (NYSE: GD).

Since its inception in 2015 the U.S. Global Jets ETF has returned 5.4%. For investors seeking airline exposure, it’s the pure play airline ETF you’ve been looking for.

Airline ETF to Watch No. 1: SPDR S&P Transportation ETF (NYSE: XTN)

  • Issuer: State Street SPDR
  • Net Assets: $133 million
  • YTD Performance: +5%
  • Expense Ratio: 0.35%
  • Price: $59

The SPDR S&P Transportation ETF tracks the S&P Transportation Select Industry Index. The stocks included in this index are U.S. transportation companies picked from the broader S&P Total Market Index. The fund is weighted heavily – about 34% – in trucking stocks. But at 24%, airline stocks make up a significant portion of the fund.

This ETF keeps roughly 80% of its assets in companies from the S&P Transportation Select Industry Index. The other 20% is allocated towards non-transportation assets to help diversify the fund’s holdings. But generally, the SPDR S&P Transportation ETF’s returns should correspond to the return performance of the S&P Transportation Select Industry Index.

Since its inception in 2011 this has returned 12%. The SPDR S&P Transportation ETF is an airline ETF with low volatility and solid growth prospects.

Action Plan

ETF investing is a good strategy in general. When you start to research ETFs, you will notice there is an ETF for everything. Learn more by reading our article “Have an Investing Idea? There’s an ETF for That.”


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