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5 Best Airline ETFs to Buy in Q1 2025
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The airline industry is crucial to global transport and investors are always on the lookout for new opportunities in this space. ETFs provide you the opportunity to simultaneously invest in various airline company stocks. This beginners guide has selected the best of the current market for you to place the right investment.
What are the top airline ETFs to buy?
Copy link to sectionOur analysts have selected five of the best airline ETFs for this year as displayed in the table below. Continue scrolling further to learn more about each in turn.
# | ETF symbol | ETF name | Learn more |
---|---|---|---|
1 | XTN | SPDR S&P Transportation ETF | Learn more > |
2 | IYT | iShares US Transportation ETF | Learn more > |
3 | JETS | US Global Jets ETF | Learn more > |
4 | OOTO | Direxion Travel & Vacation ETF | Learn more > |
5 | FTXR | First Trust NASDAQ Transportation ETF | Learn more > |
1. SPDR S&P Transportation ETF (XTN)
Copy link to section- Assets: $165 million
- Expense ratio: 0.35%
- Year of inception: 2011
- P/E Ratio: 15
- Dividend yield: 0.92%
The SPDR S&P Transportation ETF is not necessarily an airline fund. Instead, it is a fund that tracks the S&P Transportation Select Industry Index, which focuses on key areas like passenger airlines, airport services, marine transportation, and rail transportation.
The fund is made up of most airlines in the United States like Skywest, Jetblue, Alaska Air, Southwest, Delta Air Lines, and American Airlines.
There are three main reasons for investing in this fund. First, it is a fairly affordable fund with an expense ratio of 0.35%. Second, in addition to airlines, the fund is more diversified across other areas in the transportation industry.
Third, the fund trades at a bargain compared to the broader market. At the time of writing, it was trading at a PE ratio of 15, which is lower than the S&P 500 index’s 21.
2. iShares US Transportation ETF (IYT)
Copy link to section- Assets: $729 million
- Expense ratio: 0.40%
- Year of inception: 2003
- P/E Ratio: 15
- Dividend yield: 1.05%
The iShares US Transportation ETF is another airline ETF to consider. Like the XTN ETF, this one is a broader fund that tracks companies in other areas of the transportation industry. It tracks the S&P Transportation Select Industry FMC Capped Index.
Most of its 44 constituent companies are not in the airline sector. They include the likes of Uber Technologies, Union Pacific, Union Pacific, and FedEx. However, it also includes the biggest airline companies like Delta Air Lines, Southwest Airlines, Alaska Air Group, Jetblue, and Allegiant Travel.
Therefore, the ETF is a good one to invest in if you want access to airlines and companies in the other forms of transportation.
IYT is a fund that corresponds with the investment results of an index composed of US equities in the transportation sector. The fund has 50 holdings in US companies within the airline, railroad, and trucking components of the transportation sector. As such, IYT provides an overview selection of the sector.
The performance of each segment is therefore key to fund performance. Investors must consider several factors that can adversely impact profitability, i.e. surging prices of fuel. You can minimise your risk by doing your own sector research before making an investment.
3. US Global Jets ETF (JETS)
Copy link to section- Assets: $1.14 billion
- Expense ratio: 0.460%
- Year of inception: 2003
- P/E Ratio: n/a
- Dividend yield: N/A
JETS is the biggest pureplay airline ETF in the world, with 51 companies in its portfolio. It tracks companies in both the United States and other companies like the UK, Germany, France, and in Asia.
Most of its constituents are American companies like Southwest Airlines, Delta Air Lines, American Airlines Group, and United Airlines.
The other international companies in the fund are Air Canada, Bombardier, IAG, Qantas, and Airbus Group. Some of these companies like Bombardier, General Dynamics, and Boeing are not airlines but are the biggest plane suppliers in the world and their performance is not always correlated.
The JETS ETF is a good fund for anyone who wants to gain access to the airline industry.
4. Direxion Travel & Vacation ETF (OOTO)
Copy link to section- Assets: $9.2 million
- Expense ratio: 1%
- Year of inception: 2021
- P/E Ratio: n/a
- Dividend yield: N/A
Most of the companies in this fund are hotels, restaurants, and leisure, which account for 62%. They are followed by companies in the passenger airlines, entertainment, hotel & resorts, and specialized REITs.
Some of the top airlines in the fund are Allegiant, American Airlines, Delta Air Lines, and Jet Blue.
The benefit of investing in this fund is that it gives you exposure to some of the biggest American airlines. It also gives you access to affiliated companies in industries like hotels and entertainment.
The top reasons to avoid this fund is that it is very expensive with an expense ratio of 1%, which is higher than most funds and that it is an illiquid fund with just $9.2 million in assets under management. It is also a leveraged fund, whose returns can be worse in case the industry goes through a challenge as we saw during the pandemic.
5. First Trust NASDAQ Transportation ETF (FTXR)
Copy link to section- Assets: $36.5 million
- Expense ratio: 0.60%
- Year of inception: 2016
- P/E Ratio: n/a
- Dividend yield: N/A
FTXR is a fund that aims to reflect the performance of the NASDAQ US Smart Transportation Index. The fund’s small selection of 29 holdings are US companies in the transportation industry. Notable airline holdings include: Alaska Air, JetBlue Airways, Spirit Airlines, Delta Airlines, United Airlines.
Established names within the airline industry can reduce exposure to specific-holding risk in an ETF that only has such few holdings. Investors should consider the company fundamentals in doing their due diligence. This may provide an indication of profitability for the comeback of these reputed airline companies. However, like OOTO, it is a relatively tiny fund with low liquidity as evidenced by its average daily volume of $111k.
Where to buy the best airline ETFs
Copy link to sectionRegistering with an online broker is the first step to buying airline ETFs. ETFs are like individual stocks, you can buy or sell them as is convenient. The table below features our preference of the best brokers that offer airline ETFs.
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What is an airline ETF?
Copy link to sectionIt’s an exchange traded fund that holds shares in companies that operate in the airline industry. Companies in this sector provide a range of air transportation and travel services for consumers and cargo. Notable companies in the industry include Southwest Airlines, Delta Airlines, and United Airlines.
The industry is making a slow comeback after the severe plunge caused by the peak of the pandemic. Vaccine rollouts and easing of global travel restrictions inspires renewed hope. Investors interested in this space have the opportunities to buy the dip by investing in airline ETFs.
Are airline ETFs a good investment?
Copy link to sectionYes if you have the patience to hold out for a return in your investment. The airline industry is making a recovery after the pandemic hit it especially hard. If you are interested in buying the dip with airline ETFs, you must have a long-term outlook for speculative future growth.
Airline ETFs provide means to broadly invest into the industry, but are not all created equal. You must do your own due diligence into significant holdings within each ETF to determine the profitability of your investment. Key metrics for your own fundamental analysis should include: Available Seat Miles (ASM) and Revenue Per Available Seat Mile (RASM).
The good news is, people will always travel and there will always exist a need for mail and cargo to be delivered as quickly as possible. The International Air Transport Association expects approx. 7.8 billion passengers to travel by air in 2036 – nearly double the number from 2017. Airlines are going nowhere and you can use the links below to best place your investment in airline ETFs.
Methodology: How we choose the best airline ETFs
Copy link to sectionAt Invezz, we are dedicated to helping investors make informed decisions by providing authoritative, accessible, and engaging advice and recommendations. Our curated section of the best Exchange-Traded Funds (ETFs) is carefully selected by our team of experienced market analysts and reviewed by a sub-editor. This methodology outlines the rigorous process we follow to ensure our ETF recommendations are up-to-date, reliable, and insightful.
- Analyst research & recommendations: Our seasoned market analysts use their in-depth sector knowledge to identify ETFs with strong potential, ensuring they meet high standards of performance, liquidity, and market potential.
- ETF evaluation: We evaluate ETFs based on their underlying assets, historical performance, expense ratios, and tracking accuracy, alongside macroeconomic factors and sector trends.
- Fund performance reports: We assess ETFs through the latest performance reports, analyzing key metrics like returns, volatility, expense ratios, and assets under management (AUM).
- Sector analysis and external recommendations: Our detailed sector analysis, combined with recommendations from reputable sources like Barron’s and Zacks, provides an additional layer of validation for our selections.
- Quarterly review & refresh: We update our curated ETF list quarterly, re-evaluating each ETF based on the latest reports, industry developments, and market conditions to ensure our recommendations reflect the most current information available.