Gone are the days when aviation companies were ill-famed for their bankruptcy protection status. During 2005 and 2008, over half of the U.S. carriers functioned under Chapter 11 of bankruptcy protection. But things have changed in last seven years.

The U.S. aviation industry has been over the moon since the oil price started to fall in mid 2014. To add to this, a pickup in the domestic economy, rising cargo demand, a boost to tourism and cost containment by the carriers placed the industry on the top of the world (read: Market Beating Sector ETFs of 2014).

The sentiment around the sector was so bullish that airlines rocketed to the ‘highest intraday level since February 2001’ in December, per Bloomberg. Still, investors were deprived of an airline ETF to reap this return to the fullest until U.S. Global Jets ETF (JETS) was launched on 30th April 2015.

The Fund in Detail

The passively managed product intends to track the U.S. global Jets Index that looks to offer global exposure to commercial airlines, aircraft manufacturing, and airport industries. The index attaches weight to the companies on the basis of the square root of their average daily volume seen in the trailing three months.

The fund holds 33 stocks in its portfolio and is concentrated on a few individual securities, as it allocates about 70% to the top 10 holdings. Delta Air Lines (DAL) (12.9%), Southwest (LUV) (11.63%), American Airls Group (AAL) (11.32%) and United Contl Hldgs Inc (UAL) (11.04%) are the top four elements in the basket, with a combined share of about 45%. The product charges 60 bps in fees.

How Does it Fit in a Portfolio?

The global aviation industry has a rosy outlook for 2015. The outlook is especially positive for the U.S. economy, with GDP growth gaining momentum. Consolidation benefits, growing travel demand and cargo services as well as enhanced ancillary revenues should help the space to take off, per the issuer.

Other regions including the Middle East, Latin America & Africa and Asia-Pacific also play a key role in the sector’s overall growth. Apart from increased demand from the oil-rich Gulf nations, China and India will be instrumental in driving the fleet demand higher.

Also, the rising middle-income population in emerging markets is adding to worldwide customer growth. The booming global middle class will likely drive the airline industry to accumulate profits of $25 billion in 2015, up 25% year over year, per the issuer.

If this was not enough, moderate oil prices turned out to be the real catalyst to the industry. Airline profits outlook depends on fuel prices. The oil price drop of about 50% seen in 2014 is yet to swing back to its past glory this year. If it at all does, streamlined operations and adoption of stringent fuel efficiency standards in tough times will help air carriers to weather any surge in oil prices (read:3 Sectors ETFs That Should Thrive On Low Oil Prices).

ETF Competition

The road ahead for the new ETF is nothing but smooth. The industry has long been waiting for such a product after the shutdown of the Guggenheim Arca Airline ETF in 2013. While there are no direct competitors to the product, investors should note that two transportation ETFs, namely iShares Transportation Average ETF (IYT) and SPDR S&P Transportation ETF (XTN) have weight in the airlines industry.

While IYT puts about 45% of its weight in the airlines, air freight & logistics sectors, XTN places about one-fourth of the fund in these. In such a bullish backdrop, the new airline ETF has every reason to be successful. The sector’s allure will act as the wind beneath the wings for investors solely eyeing the global aviation industry (read: Does Oil Price Rise Spell Trouble for Transportation ETFs?).