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Flows Into Airlines ETF Take Off

·3 min read
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Flows Into Airlines ETF Take Off
Flows Into Airlines ETF Take Off

It's a tough time to be in the airline biz.

Around the world, airports are deserted due to lower user demand as well as travel restrictions imposed worldwide to combat the spread of COVID-19. American Airlines (AAL), United (UAL), Delta Airlines (DAL), JetBlue (JBLU) and others have all announced drastic service cuts; for example, American has reduced its daily flights from New York City by 95%.

Unsurprisingly, the US Global Jets ETF (JETS), the only ETF to track the airline industry, has plunged. Over the past month, JETS has fallen 47%. Year to date, the fund has plummeted an eye-popping 61% versus about a 30% drop against its segment benchmark, the Thomson Reuters Global Transportation Index Total Return:

Source: ETF.com; data as of April 7, 2020

 

Record Inflows, Volume Into JETS

That kind of price performance isn't usually a recipe for record volume and inflows, but that's exactly what we've seen. Since March 1, investors have poured $342 million into JETS, far more than its historical norm over the past year:

Source: ETF.com, Bloomberg; data as of April 7, 2020

 

Volume too has picked up, with current daily average volume now roughly four to five times higher than it had been before March 1.

In fact, on March 25, JETS surpassed 5 million shares traded for the first time. One year prior, the fund saw daily volume of just 11,700 shares.

Investors Positioning For Rebound

Clearly, the record activity surrounding JETS is an instance of investors trying to position themselves for a rebound in airline stocks, whenever that may occur.

Airlines have been one of the hardest hit sectors in the recent economic pullback, but many experts argue that, once the worst of the danger from the pandemic passes, it'll also be one of the first to experience a rebound. After all, modern society is connected by air travel; in 2018 (the most recent year for which data was available), 4.3 billion people had traveled by airplane at least once.

Further bolstering the industry's recovery chances: the $58 billion lifeline via the federal government's $2.2 trillion stimulus package.

Travel ETFs: JETS Vs. AWAY

Although JETS remains the only pure-play airlines ETF, there are a handful of other general transportation ETFs, including the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN). These funds include freight companies and railroads as well as airlines.

In the general theme of travel and transportation, there's also now the ETFMG Travel Tech ETF (AWAY), which tracks global travel technology companies.

JETS and AWAY offer a great illustration of how two ETFs can track the same theme, yet come at it from completely different angles.

Both are growth plays for the travel industry, but AWAY and JETS have no portfolio overlap—and we mean that literally. There isn't a single stock or sector that appears in both ETFs as you can see using our comparison tool:

Source: ETF.com Comparison Tool; data as of April 7, 2020

More separates the two than just holdings, however. JETS has lower long-term holding costs, with an expense ratio of 0.60% compared with AWAY’s 0.75%. It's also cheaper to trade, with a spread of 0.25% compared with AWAY's 0.73%.

However, AWAY has held up much better over the past 30 days, falling 36% compared with JETS' 47% drop.

(To see more about how these two funds stack up to each other—or any two funds—check out our new ETF Comparison Tool.)

Contact Lara Crigger at lcrigger@etf.com

 

 

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