MarketMoodz
Airline Stocks Hit Pre‑Covid Highs as Oil Slide Spurs Rally
The U.S. Global Jets ETF (JETS) surged in June, rising 13.5% and closing at $33.28 last Friday to reclaim its pre‑Covid high for the first time since December 2018. The move reflects a rare combination of falling oil prices, cheaper jet fuel margins and resilient travel demand that has pushed several carriers and European budget names sharply higher.
Key Takeaways
- JETS gained 13.5% in June and closed at $33.28, topping its pre‑pandemic peak last seen in December 2018.
- Over the past two months JETS is up roughly 31%, marking one of the ETF’s steepest rallies since the vaccine‑era rebound.
- Brent crude slid about 28% from its March peak to near $70 per barrel, cutting jet‑fuel headwinds by roughly $50/bbl and widening carrier margins.
- Bank of America’s Andrew G. Didora raised price targets—Delta to $93 (from $78), United to $145 (from $140) and American to $16 (from $14).
- U.S. airline P/E multiples remain about 30% below their long‑run average and American Airlines is roughly 40% under its historical P/E, leaving valuation upside but continued sensitivity to oil swings.
People Involved
- Andrew G. DidoraBank of America Securities analyst
Entities Involved
- U.S. Global Jets ETF (JETS)Aviation‑sector ETF tracking airline industry performance
- Delta Air Lines (DAL)Major U.S. carrier — target raised by BofA
- United Airlines Holdings (UAL)Major U.S. carrier — target raised by BofA
- American Airlines Group (AAL)Major U.S. carrier — target nudged by BofA
- easyJetEuropean budget carrier — top June performer in JETS
- Frontier Group HoldingsU.S. low‑cost carrier — strong June performance
- Allegiant Travel Company (ALGT)U.S. leisure carrier — notable June gains
- Tripadvisor (TRIP)Travel services company and JETS component
- Southwest Airlines (LUV)Major U.S. carrier — part of the June rally
- Air France‑KLMEuropean carrier — part of JETS constituents
- Alaska Air Group (ALK)U.S. carrier — part of the June rally
- Bank of America SecuritiesInvestment bank issuing updated airline price targets
- Brent crude (commodity)Benchmark crude — price slide reduced jet‑fuel costs
MarketMoodz Analysis
For investors, the JETS breakout confirms the sector’s leverage to fuel costs and demand: cheaper Brent has materially trimmed jet‑fuel expense—airlines’ largest variable cost—boosting margins and earnings visibility for the summer travel season. The rally has lifted both cyclical low‑cost names (easyJet, Frontier, Allegiant) and U.S. majors (American, Southwest, United), and recent BofA target upgrades signal growing analyst confidence that cheaper fuel can translate into higher free cash flow and potential buybacks or capacity discipline.
That said, the move still sits on a cautious foundation. U.S. airline P/E multiples remain roughly 30% beneath long‑run averages and American Airlines about 40% below its historic multiple, meaning much of the upside rests on sustained lower fuel and tight capacity. The ETF’s roughly 31% two‑month gain is one of the steepest rallies since the vaccine roll‑out era, but sector returns have historically been volatile—oil shocks, capacity missteps or a lull in demand can reverse multiple expansion quickly.
Watch three variables that will decide whether gains stick: oil prices and jet‑fuel cracks (a reversal would compress margins fast), carriers’ capacity plans into fall (seat supply will determine yield resilience), and fare inflation/volume trends—May data already showed elevated ticket prices year‑over‑year. Investors should verify price targets and ETF/constituent levels against primary market data and bank reports before repositioning exposure.
Source: Original Article