As Winter Storm Niko blanketed the Northeast in snow last week, disrupting scores of flights in the U.S., airline executives convened in Washington to talk shop with President Donald Trump.

Back in November, I wrote that domestic carriers are likely to see the new president—himself the former owner of the now-defunct Trump Airlines—as a strong partner in several key areas. Although a couple of airline CEOs have recently expressed strong opposition to some of Trump’s protectionist immigration policies, Thursday ’s meeting appeared to be constructive, with the president telling the group he would soon be announcing something “phenomenal in terms of tax and developing our aviation infrastructure.”

Details of the tax plan, he said, would likely be announced sometime in the next two or three weeks. This rejuvenated some of the spirit that swept through the market soon after his election, reassuring investors that reform would come sooner than expected.

Among other topics discussed at the meeting were the need for airport infrastructure improvements, industry deregulation, air traffic control and U.S. carriers’ competitive disadvantage to heavily-subsidized Persian Gulf carriers. Three state-owned Gulf carriers in particular have received as much as $50 billion in subsidies from Middle Eastern governments since 2004, which allow them “to operate without concern for turning a profit,” according to a letter addressed to Rex Tillerson, the new Secretary of State, and signed by three U.S. airline CEOs, including Doug Parker of American Airlines, Edward Bastian of Delta Air Lines and Oscar Munoz of United Airlines. U.S. airlines, obviously, do not have the same privilege, putting them at a competitive disadvantage in the international market. Encouraging the Gulf states to end subsidization, as the CEOs hope, would be a huge win for domestic carriers and their workers.

The market seemed to like what it heard, as the NYSE Arca Airline Index rallied close to 2.3 percent Thursday. This was the biggest one-day move for the group in about a month, during which Trump’s executive immigration ban grounded airline stocks.

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The selloff following the executive order was overdone, I think, but it gave airline investors such as Warren Buffett an attractive buying opportunity.

Speaking of which, we learned last week that Buffett was convinced to bet big on the industry, reversing his famously negative opinion of the group, after being in attendance at one of Doug Parker’s investor presentations last March. Parker told attendees that consolidation had fundamentally transformed the industry, making it efficient and focused on demand.

What else is driving the airline industry?

 

Teaching an Old Dog New Tricks

Airlines got another boost last week after a federal appeals court, in a unanimous decision, struck down Trump’s travel ban. This prompted the president to tweet “SEE YOU IN COURT,” presumably meaning the Supreme Court.

With respect to Trump, I’m reminded of a statement former president George W. Bush made back in 2010, less than a year after leaving office. “Here’s what you learn,” he said. “You realize you’re not it. You’re part of something bigger than yourself.” The buck might stop with the president, but the office is so much greater than one man.

This point was made by David Gergen, former advisor and senior official to a number of presidents, including Nixon, Ford and Reagan. He’s now a CNN political analyst, and it was my pleasure to hear him speak at Harvard recently. Trump is learning the hard way, Gergen said, that the Office of the President cannot be run like the Trump Organization, or any other private company. In public office, there are checks and balances, and there’s blindingly harsh transparency—all of which the billionaire president, aged 70, has never had to deal with.

Trump ran largely on his dealmaking expertise, and I’m still willing to give him the benefit of the doubt that he can negotiate good deals for the U.S. But it’s important to remember that successful deals, in business and in government, often can’t occur without a judicious amount of compromise. If he truly believes in the value and necessity of imposing a temporary immigration ban on seven mostly-Muslim countries, his administration will need to go about it in a way that pleases the courts.

But then, none of us should be surprised if he insists on the ban in its current form. “My style of dealmaking is quite simple and straightforward,” he wrote 30 years ago in Art of the Deal. “I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after.”

The U.S. Global Jets ETF (NYSE:JETS) was trading at $28.93 per share on Monday afternoon, up $0.52 (+1.83%). Year-to-date, JETS has gained 3.80%, versus a 4.15% rise in the benchmark S&P 500 index during the same period.

JETS currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #22 of 33 ETFs in the Industrials Equities ETFs category.

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The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The index benchmark value was 500.0 at the close of trading on December 20, 2002. The MVIS Global Junior Gold Miners Index includes companies that generate at least 50% of their revenues from (or, in certain circumstances, have at least 50% of their assets related to) gold mining and/or silver mining or have mining projects with the potential to generate at least 50% of their revenues from gold and/or silver when developed. Such companies may include micro- and small-capitalization companies and foreign issuers.

The NYSE Arca Airline Index (XAL) is an equal dollar weighted index designed to measure the performance of highly capitalized companies in the airline industry. The XAL Index tracks the price performance of major U.S. and overseas airlines.

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