The S&P 500 gained nearly 1% yesterday, April 14, 2025, extending a relief rally that lifted most sectors across the board — tech, industrials, consumer, you name it. Market sentiment was broadly positive. But if you were watching closely, there was one glaring exception: Airlines. The U.S. Global Jets ETF (JETS) – which tracks major airline stocks – fell 1.15% while the rest of the market climbed. And this isn’t a one-day blip. It’s a symptom of a much deeper, concerning trend that many investors may have overlooked.
Airlines Are in a Tailspin
The JETS ETF has been plummeting all year.
- S&P 500 YTD (2025): down 8%
- JETS YTD (2025): down a staggering 25%
The top holdings of the ETF – Southwest (NYSE:LUV), Delta (NYSE:DAL), American (NASDAQ:AAL), and United Airlines (NASDAQ:UAL) – make up over 40% of the fund. And they’ve tanked heavily this year. The figures below are YTD returns:
- LUV: down 24%
- DAL: down 33%
- AAL: down 45%
- UAL: down 32%
This isn’t sector rotation. This is a sector collapse. And the numbers behind it are as concerning as the charts.
Strong Headwinds Are Hurting Growth
Historically, airlines have been volatile, but they at least had growth to show for it post-COVID. Over the past 3 years, revenue growth for these carriers ranged from 22-36% annually. But here is the shock: In the last 12 months that momentum evaporated and these airlines grew between 3-6%
That’s a dramatic slowdown. And without pricing power, it’s hard to imagine growth reaccelerating meaningfully from here – especially as economic conditions tighten and consumer discretionary spending cools.
And the Debt Load? Things Don’t Look Good
Take American Airlines for example – with a staggering Debt-to-Equity ratio of 5.4x, a thin operating margin of 5.9%, and a free cash flow margin of merely 2.4% – how exactly does a company with those economics plan to pay down a huge debt load?
Southwest isn’t faring much better. Once considered a fiscally sound airline, it is now barely breaking even on operating margin, with persistent pressure on both fuel and labor costs.
The result: investors are not interested at all. You shouldn’t be either. These airline stocks are trading at PE multiples of <10 and PS multiples of <0.5. This is not deep value – this is the market pricing in huge risk. We exclude stocks that price in such huge risks in the Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics
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