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Tom Lydon, ETF Trends (163 clicks)
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Well, they should know. An airline industry group predicted this week that thanks to a global recovery and more demand for air travel, the world’s airlines would report a profit that should cheer the industry.

A renewed surge in demand for air travel is expected this summer, which led an industry body to predict Monday that the world’s airlines would report a combined profit of $2.5 billion this year. Nicola Clark for The New York Times reports that air traffic is growing alongside with economic growth in most regions.

But it won’t be smooth sailing.

The weakness of the recovery in Europe, combined with the effects of a weaker euro and the disruptions caused by the eruption of the volcano in Iceland this spring, may leave European carriers deeply unprofitable until at least 2011.

On the flip side, U.S. airline passengers, who will be flying on full flights this summer, may collect higher payments for being involuntarily bumped by carriers.

Manila Publishing reports that U.S. Transportation Secretary Ray LaHood proposed raising the maximum payment by 63%, to $650, if fliers arrive within two hours of their original schedule, and $1,300 if not. The targets, raised two years ago, are $400 and $800.

Across the board in the United States, demand for tickets is growing almost twice as fast as the number of available seats, and fares are increasing significantly.

  • Claymore/NYSE Arca Airline (FAA): U.S. airlines get the largest weighting in this fund at 70.4%. European carriers make up another 12% of the total weight.

Tisha Guerrero contributed to this article.

Disclosure: None

Source: Claymore Airline ETF: Cleared for Takeoff This Summer