Assessing the Structural Risks of the U.S. Global Jets ETF (JETS)

The U.S. Global Jets ETF (JETS) has emerged as a key vehicle for investors seeking exposure to the global air travel industry, encompassing airlines, manufacturers, airports, and travel technology firms. However, its structural risks-particularly concentration risk and fuel cost volatility-demand careful scrutiny. This analysis evaluates how these factors could impact long-term returns, drawing on recent portfolio data and industry trends.

Concentration Risk: A Double-Edged Sword

JETS is inherently concentrated, with its top 10 holdings accounting for 60.7% of assets as of December 2025. Southwest Airlines Co., United Airlines Holdings Inc., American Airlines Group Inc., and Delta Air Lines Inc. alone represent over 43% of the fund's net assets. This heavy weighting in North American airlines, coupled with an 89.18% allocation to the Industrials sector, exposes the ETF to sector-specific downturns. For instance, a regulatory shift, labor dispute, or economic slowdown in the U.S. airline industry could disproportionately affect JETS.

While the fund's December 2025 reconstitution added China Southern Airlines and Flughafen Zürich AG, replacing Aeroports De Paris and Wizz Air, such adjustments have limited scope in mitigating concentration. JETS remains non-diversified, with 74.9% of assets in U.S. stocks and 24.7% in foreign equities. This geographic and sectoral skew amplifies vulnerability to regional shocks, such as the U.S. travel demand decline noted in 2025, which contrasts with global growth trends.

Fuel Cost Volatility: A Persistent Headwind

Fuel expenses, which account for 30–50% of airline operating costs, remain a critical risk for JETS. While 2025 saw jet fuel prices stabilize near $2 per gallon, historical volatility underscores the sector's fragility. Airlines within JETS employ hedging strategies to mitigate this risk, but outcomes vary. For example, Southwest Airlines' use of call options and collar structures has stabilized costs, whereas Delta Air Lines faced significant hedging losses in 2015–2016.

Research indicates that hedging reduces both total and idiosyncratic volatility, yet it may lower Sharpe ratios by constraining upside potential during favorable market conditions. This trade-off is particularly relevant for JETS, as its holdings' hedging practices directly influence the ETF's risk-return profile. Moreover, the collateral costs of maintaining hedging positions-such as Southwest's $1 billion pledge in 2016-can strain liquidity, indirectly affecting profitability.

Balancing Act: Operational and Strategic Mitigants

To counter these risks, some JETS constituents have adopted operational hedging techniques, such as fleet standardization. Southwest's operational discipline, for instance, has historically offset fuel price shocks. However, such strategies require capital investment and time to yield benefits, leaving short- to medium-term volatility unaddressed.

For JETS investors, the challenge lies in balancing exposure to a high-growth sector with the inherent risks of concentration and fuel price swings. While the fund's focus on global air travel aligns with long-term demographic and economic trends, its structural vulnerabilities necessitate a cautious approach.

Conclusion

The U.S. Global Jets ETF offers compelling access to a dynamic industry but is not without structural risks. Its heavy concentration in North American airlines and the Industrials sector, combined with the persistent threat of fuel cost volatility, creates a profile where returns could be highly sensitive to macroeconomic and operational shifts. Investors must weigh these factors against the fund's potential, recognizing that diversification and hedging strategies-while imperfect-remain critical tools for managing downside risk.