Jon Lewis

New Airline ETF -- Should You Jump on Board?

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A recently created airline ETF got me thinking about whether now is a good time to invest in the sector.

Before I get started, though, I want to send my condolences to those who lost loved ones when Continental Connection Flight 3407 crashed in Buffalo, N.Y., on Feb. 12. Events like this are heart-wrenching, but, thankfully, they are few and far between.

What's in a Name?

In the continuing tradition of coming up with cute ticker symbols for exchange-traded funds (ETFs), Claymore Securities recently launched the first airline ETF -- the Claymore/NYSE Arca Airline ETF.

The symbol? FAA. How sweet.

It got me to thinking about other clever symbols. Here's a list I came up with, just for grins and giggles:

• FAN -- wind energy
• TAN -- solar energy
• JNK -- high-yield bonds
• MOO -- agribusiness
• COW -- livestock
• DIG -- oil & gas
• DUG -- short oil and gas
• KOL -- coal
• CUT -- timber
• WOOD -- timber & forestry
• GULF -- Middle East dividend
• ROI -- large-cap growth
• DOG -- short Dow
• ROM -- technology

OK, enough silliness. Let's get back to FAA.

Will FAA Take Flight?

You'd think with more than 700 ETFs floating around (as of the end of November) that someone would have launched an airline ETF by now. But FAA is the first.

Other than its ticker, there's nothing terribly creative about FAA, which tracks the newly created NYSE Arca Global Airline Index. The ETF contains 25 stocks, with U.S. carriers comprising 70% of the assets.

Interestingly, not one of the 25 qualifies as a large-cap stock (more than $10 billion in market cap). This tells you how far airlines have fallen.

The major players on the U.S. side are Continental Airlines (CAL), Southwest Airlines (LUV) and AMR Corp. (AMR), which make up about 40% of the fund's assets.

CAL, LUV and AMR reported earnings at the end of January, and all logged losses. None were a surprise.