Airline ETF Ascends on Descent of Fuel Costs

Airline companies have taken flight recently in spite of the October stock market sell-off, tremendous volatility, and global economic slowdown, as crashing crude oil prices lower the cost of jet fuel for the industry.

The accompanying table (click to enlarge)  includes statistics for the ETFI Global Airline Index and short ETF proposal, which has still lost over 60% of its market value in the past year for the 30 lowest rated companies despite the recent bounce. Both the 30 lowest rated and all 50 companies have fared worse than the overall market and benchmarks such as the iShares Dow Transports (IYT) and AMEX Airline Index.

Three of the five lowest rated companies include China Eastern (CEA),  China Southern (ZNH) Airlines and GOL Linhas (GOL), which each lost over 80% of their market value in the past year with additional selling pressure from the sell-off in the 'BRIC' emerging markets. The dramatic decline in jet fuel costs removes the risk of imminent bankruptcies for passenger airlines, but the industry is still plagued by overcapacity with declining business and consumer demand in the wake of the global economic slowdown.