Airline Stocks Are Rallying In 2023, Even With Travel Chaos: What Happens Next?

So far, 2023 is getting off to good start for investors. Of course, the release of the December Consumer Price Index on Thursday morning could change that in a hurry.

As of noon Wednesday, the S&P 500 cash index was higher by 2.8% and some sectors were in the green by much more than that.

One of them, airlines, represented by the US Global Jets ETF JETS, is sporting a 12.7% year-to-date increase at the price of $19.26.

The impressive price action in issue makes it the PreMarket Prep Stock of the Day.

In-Line With The S&P 500 For 2022: Whereas the S&P 500 index skidded 17.3% in 2022, the Jets ETF was a tad worse at 19%. One major headwind for the sector, along with rising wages, was the increase in its biggest expense, fuel, best represented by crude oil’s 33% gain for the year.

For some of the airlines that hedge, this was not as big as concern; others that did not simply passed on the added expense on to customers.

1 Red Day: The Jets ETF started the year with a small decline on Jan. 3, falling from $17.08 to $16.97. At this time, it is in the midst of a five-day winning streak, with the lion's share of the gains coming on Jan. 6 ($18.06-$18.43) and in Tuesday’s session ($18.73 to $19.18).

The ETF closed at $19.25 Wednesday, matching an Aug. 16 high. 

Flight Delays, Who Cares? If there is any news that might derail the rally, it could be the delay of all domestic flights Wednesday due to a system outage in the FAA’s U.S. traffic operations.
As usually occurs with issues in short-term uptrends, the lower opening price Wednesday was greeted with willing buyers.

In fact, the opening print was only a few pennies off the low for the session, and the ETF continued to make incremental new highs for the session.

PreMarket Prep's Take: When the issue was being discussed on the show, investors were still digesting the scope of the outages and the ETF was trading slightly in the red.

Co-host Dennis Dick echoed the same sentiment that the hosts of the show have had over the last few months.

“Issues in the Jets ETF have low price-to-earnings ratios, and that is where investors have been putting their money to work," he said.

“The rapid rise of inflation and the chance of an upcoming recession has not yet deterred people from traveling.”

Dick said he remains cautious on the markets until the Federal Reserve changes its stance on interest rates. 

Airlines Moving Forward: Since mid-2019, airlines have severely underperformed the markets on the whole, but certainly have had periods of outperformance. Whether this recent rally is symptomatic of a change in the nearly four-year trend is yet to be determined.

For now, the consumer is still spending, especially on travel, and the economy has not fallen into the abyss, as many have been predicting.

From a technical perspective, there is limited monthly resistance above the ETF's current area until its June 2022 high of $20.75 and May high of $21.79. For the ultra bulls, the issue remains far from its past pandemic high made in March 2021 at $28.98.

Watch the airline stock discussion from Wednesday's PreMarket Prep:

Photo via Pixabay.