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Don Dion's Weekly ETF Blog Wrap

FAA Is Cleared for More Upside
6/7/2010 1:38 PM EDT

There may be turbulence in the market today, but the skies are clear for the global airline industry. At the meeting of the International Air Transport Association today in Berlin, the industry group announced that it expects a profit of $2.5 billion in 2010. The last time the group announced a profit was in 2007.

Last Thursday, I told readers to look for upside in the airline sector after Giovanni Bisignani, head of the IATA, predicted a better-than-expected recovery for the airline industry ahead of this week's meeting. Bisignani had stated that the global airline industry could see a full recovery (post-2008 economic meltdown) in as little as two years.

Today's meeting seems to confirm Bisignani's outlook. "Global traffic is back to pre-recession levels," Bisignani noted, according to CNN. The industry is expected to see losses in Europe from the volcano and economic setbacks, but most other regions are expected to be very profitable.

With fuel prices low and a slow economic recovery on the horizon, I still believe the Claymore/NYSE Arca Airline (FAA) is the best way to play this group. The airline industry has such a checkered past, so investors looking to gain exposure to the group's upswing should consider a well-balanced ETF. The top five holdings in FAA's underlying portfolio are UAL Corp. (UAUA), Southwest Airlines (LUV), Delta Airlines (DAL), Singapore Airlines and Deutsche Lufthansa.

Increased consumer confidence and a better-than-expected recovery have already helped FAA cruise more than 9% higher year to date. FAA is trading lower this afternoon despite the positive industry news from the IATA meeting, but I still believe FAA is a good medium-term bet on a recovering industry. Pick up some shares today on weakness, and hold this well-diversified fund as a solid bet on a recovering industry.
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FAA $0.00 0.00%
PHYS $10.61 -0.84%
GLD $122.21 -0.61%
DVY $81.69 -0.10%
SGOL $124.73 -0.55%


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