US Global Jets index (JETS)

Key Updates

JETS declined 2.14% to $25.19 since the April 9th report, falling back below the critical 200-day moving average and confirming the failed breakout attempt documented in previous analysis. The index has now surrendered all gains from the April 8th surge, with YTD performance deteriorating to -10.26%. Four new developments emerged: analyst EPS forecasts for 2026 have declined 25% since December, jet fuel prices nearly doubled from $2.50 to $4.88 per gallon, US cross-country fares are up 50% year-over-year, and United is modeling scenarios with Brent crude at $175 per barrel. The investment thesis has materially weakened as structural profitability concerns intensify alongside geopolitical fuel supply disruptions.

Current Trend

JETS is in a confirmed downtrend with YTD performance at -10.26%, significantly underperforming broader equity markets. The index failed to sustain the April 8th breakout above $26.57, reversing sharply and breaking back below the 200-day moving average near $25.88. Current price at $25.19 represents a 5.2% decline from the recent high and establishes a lower high in the downtrend structure. Near-term momentum remains negative with the 1-day decline of -2.70% accelerating the selloff, while the 6-month performance of +2.27% demonstrates persistent weakness relative to the -10.26% YTD loss. The failed breakout and subsequent breakdown below key moving averages confirms renewed selling pressure and validates the bearish trend established in early 2026.

Investment Thesis

The investment case for JETS centers on structural recovery in air travel demand and airlines' ability to pass through elevated costs via pricing power. However, this thesis faces severe challenges from unprecedented fuel cost inflation and industry profitability constraints. Average return on invested capital across the sector measured less than 7% in 2025, well below the cost of capital, indicating chronic value destruction. The geopolitical disruption to fuel supplies has created a supply-side shock that airlines cannot fully offset through fare increases without destroying demand. While premium revenue strategies show promise—premium seats are growing nearly three times faster than economy seats—this represents a mix shift rather than industry-wide margin expansion. The fundamental thesis requires both sustained travel demand and fuel price normalization, neither of which appears imminent given current geopolitical tensions.

Thesis Status

The investment thesis has deteriorated significantly since the previous report. Analyst forecasts for 2026 EPS across 13 publicly traded airlines have declined 25% since December, directly contradicting expectations for earnings recovery. The fuel cost environment has worsened dramatically, with jet fuel prices nearly doubling to $4.88 per gallon and supply constraints persisting due to Strait of Hormuz disruptions. Most critically, if Brent crude had averaged $80 per barrel instead of $69 last year, operating profit across rated U.S. airlines would have fallen by roughly 40%, demonstrating extreme operational leverage to fuel prices. The thesis assumed airlines could maintain profitability through modest fare increases, but average US cross-country flights now cost approximately 50% more than a year ago, raising demand destruction risks. The combination of compressed margins, elevated leverage at weaker carriers, and prolonged fuel price uncertainty invalidates the recovery narrative that supported higher valuations.

Key Drivers

Jet fuel supply disruption remains the dominant driver, with prices nearly doubling from $2.50 to $4.88 per gallon since the February 28th U.S.-Israel attack on Iran. The effective closure of the Strait of Hormuz has created unprecedented supply constraints, with European jet fuel rising 120% and US jet fuel increasing 82%, compared to a 50% rise in Brent Crude. This widening crack spread between crude and refined products disproportionately impacts airlines. Capacity adjustments are accelerating, as United Airlines announced reductions to Asia flights and Deutsche Lufthansa directed teams to develop aircraft grounding plans. Financial stress is concentrating among weaker carriers, with low-cost carriers like JetBlue, Spirit, and Frontier already unprofitable before the latest spike. The lack of fuel hedging among U.S. carriers exacerbates exposure, as major US airlines face direct exposure to price volatility without the financial derivatives protection used by European carriers. Industry consolidation pressures are mounting, with Delta CEO Ed Bastian acknowledging that sustained high fuel prices historically force industry consolidation and weaker player elimination.

Technical Analysis

JETS has confirmed a failed breakout and resumed its primary downtrend. The index briefly broke above resistance at $26.57 on April 8th but failed to hold gains, reversing sharply and breaking back below the 200-day moving average near $25.88. Current price at $25.19 establishes a lower high relative to the April 8th peak, confirming downtrend continuation. The -2.70% single-day decline indicates accelerating selling pressure, while the -2.14% move since the last report validates the breakdown. Key support levels lie at $24.50 (March low) and $23.00 (YTD low), both of which appear vulnerable given current momentum. Resistance has solidified at $25.88 (200-day MA) and $26.57 (recent failed breakout), creating a clear ceiling for near-term rallies. The pattern of lower highs and lower lows remains intact, with no technical evidence of trend reversal. Volume patterns and momentum indicators would likely show deteriorating breadth, though specific data is not provided.

Bull Case

• Premium seats in the U.S. market are growing nearly three times faster than economy seats, with United's business-class capacity representing 11.5% of total scheduled seats, enabling airlines to capture higher-margin revenue and partially offset fuel cost inflation through mix improvement.
• United Airlines plans to add over 250 aircraft within two years with strategic emphasis on premium seating, including 47 Boeing 787-9s with enhanced premium amenities, positioning carriers to capitalize on sustained business travel recovery and premium demand trends.
• Stronger carriers such as Delta and United have higher operating margins, lower leverage, and stronger liquidity positions, enabling them to absorb prolonged fuel increases and potentially acquire weaker competitors at attractive valuations, driving industry consolidation and eventual margin improvement.
• United's premium revenue growth reached 11% in 2025 driven by increased passenger willingness to pay for enhanced comfort, demonstrating pricing power in premium segments that can partially offset fuel cost pressures through yield management rather than volume growth.
• Most carriers are expected to remain profitable despite analyst forecast reductions, indicating the industry can weather the current fuel shock without widespread bankruptcy, preserving equity value and enabling eventual recovery when geopolitical tensions ease.

Bear Case

• Jet fuel prices nearly doubled from $2.50 to $4.88 per gallon with supply constraints from Strait of Hormuz closure, representing the most severe fuel shock since 2008 and directly destroying profitability across the sector as fuel represents 25-33% of operating expenses.
• Analyst forecasts for 2026 earnings per share across 13 publicly traded airlines have declined 25% since December, indicating systematic earnings deterioration that invalidates current valuations and suggests further downward revisions as fuel costs remain elevated.
• United Airlines is modeling scenarios where Brent crude reaches $175 per barrel, which would increase its annual fuel bill by approximately $11 billion—more than double its best-ever annual profit, demonstrating existential profitability risk if geopolitical tensions persist through 2027.
• Average US cross-country flights now cost approximately 50% more than a year ago, creating significant demand destruction risk as discretionary travelers reduce frequency and budget-conscious consumers shift to alternative transportation or cancel trips entirely.
• Average return on invested capital measured less than 7% in 2025, well below cost of capital and demonstrating chronic value destruction even before the current fuel shock, validating Warren Buffett's skepticism about airline investments and suggesting the sector remains structurally uninvestable.