Increased Air Demand in Asia May Boost Airline ETF

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 |  Includes: CPCAY, FAA, KRNRF, QUBSF, SPAAF.PQ
by: Kevin_Grewal

As economies in Asia continue to prosper, the demand for air travel is following putting the Guggenheim Airline ETF (NYSEARCA:FAA) in a position to potentially reap the benefits.

According to aviation forecaster Ascend Worldwide, Asia-Pacific region airline carriers have ordered 133 commercial jets so far this year, comprising 23 percent of all new orders globally, with Cathay Pacific Airways (OTCPK:CPCAY), Qantas Airways (OTCPK:QUBSF) and Emirates Airline awaiting delivery of about 400 planes. Furthermore, the number of new orders globally is expected to nearly double over the next twenty years to combat a shortage in both cargo and large passenger fleet, driven primarily by Asia-Pacific in the near term.

The purchasing power of consumers in the Asia-Pacific region has increased significantly over the past five years and is expected to continue to trend upward making airline travel that much more affordable in the region. Both China and India have witnessed purchasing power more than double over the past ten years and are expected to continue to see this growth over the next ten years, which in turn has lead to increased consumer spending and will likely lead to increased demand in airline travel.

As previously mentioned, one way to play the global airline sector is through the Guggenheim Airline ETF (FAA). Although FAA is heavily concentrated with US based airlines (US accounts for more than 70 percent of its county weighting), it does give some exposure to Singapore Airlines (SPAAF.PK), Qantas, Cathay Pacific Airways and Korean Air Lines (OTC:KRNRF).

Disclosure: No Positions