The U.S. Global Jets ETF (JETS), the most widely watched gauge of global aviation, climbed 13.5% in June. That's the best performance of any U.S. industry ETF over the last month.
The move carried the fund above its pre-Covid highs for the first time, closing at $33.28 last Friday — territory it last held in December 2018. Over two months, the fund has gained 31%, its sharpest run since Covid vaccines were first distributed.
The trigger sat thousands of miles from any trading floor, in the Strait of Hormuz. After the waterway reopened, traffic recovered to roughly 70% of pre-war levels and crude oil collapsed to $70 a barrel — a drop of more than $50 from its March peak.
Chart: JETS ETF Completes Covid Comeback As Oil Crash Sparks Airline Rally
Why Cheaper Crude Moves Airline Stocks
Jet fuel is the single largest variable cost for most carriers. It tracks crude almost dollar for dollar. When oil falls, the savings drop straight to the bottom line.
A $50 retreat in crude is, in effect, a margin expansion that the market can price before a single earnings report lands.
For travelers, the chain eventually runs in reverse. Cheaper fuel gives airlines room to hold fares steady into peak summer demand rather than pass through the surcharges that defined the war months.
Andrew G. Didora, analyst at Bank of America Securities, captured the setup in a recent note, describing a "perfect storm of low capacity, falling fuel, strong demand."
The bank noted Brent Crude fell 28% over the prior month while airline equities rallied 26% across the group — a near one-for-one reaction to the energy reversal.
The investment bank indicated that airline fundamentals have improved, thanks in large part to declining fuel prices, moderated capacity growth, and resilient travel demand.
Average airline ticket prices climbed 18.5% year-over-year in May, airline fare CPI accelerated to 26.7%, and Air Passenger Services PPI rose 14.4%, suggesting travelers continue to absorb higher fares.
The move has Wall Street raising the bar.
Didora lifted his price objective on Delta Air Lines Inc. (Delta (DAL)) to $93 from $78 and on United Airlines Holdings Inc. (United (UAL)) to $145 from $140, both Buy-rated, while nudging Neutral-rated American Airlines to $16 from $14.
Valuation is part of why analysts still see room. Even after the rally, U.S. airline price-to-earnings multiples sit about 30% below their long-run average, Didora estimates — with American trading roughly 40% under its own historical P/E.
