US Airlines record YTD High, the hot money that Buffet never makes!

On June 27th, the aviation industry experienced a general surge, with the $U.S. Global Jets ETF(JETS)$ soaring by a remarkable 4.41%, approaching the high point seen in February.

Among the three major airlines, $Delta Air Lines(DAL)$ led the rally, reaching a new high for the year and returning to its March 2020 level. $United Continental(UAL)$ and $American Airlines(AAL)$ had relatively smaller declines previously, so their rebound on the same day was slightly less impressive. UAL has shown the strongest rebound since the beginning of the year.

Overall, the aviation industry has benefited from low oil prices and a slowdown in inflation, providing a favorable environment for recovery.

The CEO of Delta Air Lines recently raised profit expectations for the second quarter, as strong demand and purchases of premium tickets may result in the highest Q2 profits in the company's history. It is anticipated that the earnings per share for Q2 will increase from the previous range of $2.00-2.25 to $2.25-2.50.

Earlier, the International Air Transport Association (IATA) predicted that the net profit of the aviation industry in 2023 is expected to reach $9.8 billion, double the forecast of $4.7 billion made in December of the previous year. It is estimated that the operating profit of the aviation industry in 2023 will reach $22.4 billion, an increase of $3.2 billion compared to the December forecast from the previous year. In terms of passenger traffic, it is projected that there will be approximately 4.35 billion travelers in 2023, close to the pre-pandemic level of 4.54 billion in 2019.

However, the expected cargo volume is forecasted to decline to 57.8 million metric tons, down from 61.5 million metric tons in 2019, mainly due to a sharp slowdown in international trade. Meanwhile, IATA also forecasts that global airline industry revenue will grow by 9.7% compared to the previous year, reaching $803 billion. Cost growth is expected to be kept at 8.1%. Despite economic pressures affecting profit expectations, strong booking demand and lower fuel prices have collectively helped improve the industry's profitability.

Furthermore, in terms of risk factors, the factors with relatively broad impact include U.S. debt default, escalation of Russo-Ukrainian conflict, global economic recession, and inflation. However, the impact on the aviation industry appears low due to the lower probability. Factors with stronger influence include supply-demand imbalances, escalation of global trade wars, appreciation of the U.S. dollar, climate-related cost increases, and changes in oil prices.

However, at present, the risk factors seem weak, and many factors are developing in favor of the aviation industry, such as falling oil prices and rising travel demand.