New Jets ETF A Way To Play Red-Hot Airlines

(RTTNews) - Investment manager U.S. Global Investors, Inc. (GROW) has launched 'JETS' airline industry exchange-traded fund or ETF (JETS) following huge recent profits for major U.S. fliers.

The San Antonio, Texas-based investment adviser said JETS is the only thematic ETF that is focused on the airline industry. It offers investors global exposure to commercial airline, aircraft manufacturing, and airport industries based on fundamental and liquidity factors.

JETS is a smart beta, passively managed fund that is designed to track the U.S. Global Jets Index, which is rebalanced and reconstituted quarterly. The funds expense ratio is 0.60 percent.

In recent times, the success of domestic and international airlines is due to the significant restructuring of the airline industry. The structural changes to the industry and low oil prices have once again made airlines an attractive investment proposition.

The company said free cash flow, an important measure of financial performance, is expected to reach new highs across the industry.

"Airlines have demonstrated the 'magic' financial factor, and that is free cash flow," said Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors.

The company noted that said the U.S. airline industry alone is expected to see a pretax profit of $3.5 billion in the first quarter, compared to $700 million in the prior-year quarter.

JETS ETFs will provide investors exposure to the both domestic and international airlines. The fund will have 80 percent allocation to top U.S. domestic airlines such as Southwest, Delta, United and American, while 20 percent will be allocated to international names such as Japan Airlines, Air Canada, EasyJet, etc.

However, investors should also be cautious as two other airline focused ETFs, Direxion Airline Shares ETF and Guggenheim Arca Airline ETF, shut down in 2011 and 2013, respectively, due to lack of interest.

"It's easy to forget that between 2005 and 2008, about 70 percent of U.S. carriers were operating under Chapter 11 bankruptcy protection, but we've seen a sea change since then and the benefits of restructuring started showing up in 2013," Holmes added.