Ebene News – CA – Can the JETS ETF benefit if airline stocks embrace sustainability?

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18 Feb 2021, 13: 00GMT

The US Global JETS ETF’s share price has made a turbulent rally from its historic 52-week – and all-time low – of $ 11.25, recorded on March 19 of last year, as the severity of the COVID-19 pandemic was becoming clear

Since the JETS ETF stock price fell 6383%, from $ 31 10 on February 18 to $ 11 25 a month later, the fund has gradually risen, closing at $ 23 56 last week

JETS, which was launched in April 2015, tracks the performance of airline stocks with a particular focus on US airlines Its largest holdings are Southwest Airlines [LUV], with 1070% weighting, Delta Air Lines [ DAL] (992%), American Airlines [AAL] (977%) and United Airlines [UAL] (875%) In total, its 10 main components account for over 63% of the ETF

As the JETS ETF’s share price shows airline stocks temporarily recover from the impact of the coronavirus, as vaccines are approved and rolled out, the longer-term future of the industry may lie in whether air travel can become truly sustainable What are the options and obstacles facing airline actions in their attempt to be carbon neutral?

Airlines are under pressure to achieve net zero greenhouse gas emissions by 2050 The main way to reach this ambitious target is to use sustainable aviation fuels (SAF) These alternatives mimic kerosene, the refined petroleum traditionally used to power planes From 2016 to 2020, only 300,000 out of 188 million flights used FAS – less than 02% – according to the International Air Transport Association, as reported by the Wall Street Journal ( WSJ)

Although the alternative exists, however, there is still a long way to go before it fully replaces kerosene “To meet global climate goals, we need to rapidly build up SAF’s production capacity,” says Charlotte SkyNRG’s Hardenbol, Aviation Today reports “If you look at the 2050 targets of the International Civil Aviation Organization (ICAO) for a 50% reduction in carbon emissions from 2005… we need to produce 265 million tonnes of SAF by 2050 ”Hardenbol says the figure for 2019 was only 200,000 tonnes

“If you look at the 2050 targets of the International Civil Aviation Organization (ICAO) for a 50% reduction in carbon emissions from 2005… we need to produce 265 million tonnes of SAF by 2050 “- Charlotte Hardenbol from SkyNRG

So, is the goal achievable? Hardenbol calculates that “we would need to build 500 sustainable aviation fuel production facilities at a scale of 500,000 tonnes through 2050 And that will require a lot of innovation for new technologies to evolve and a lot of funding”

The most advanced option is biofuel, which is made from cooking oil, animal fats, agricultural crops and unused wood, and reduces emissions by up to 80% Although United Airlines has used biofuel for the first time in 2009 and have been using it regularly since 2016, its overall use is minor compared to conventional fuel The problem is the cost: “Fuels cost up to four times more than conventional jet fuel… c ‘this is where the business case collapses,’ says Lauren Riley of United Airlines, as WSJ reports

That said, there is progress Microsoft [MSFT] recently signed an agreement with Alaska Airlines and SkyNRG to use biofuel on some of its frequent business travel routes Shell will turn 200,000 metric tonnes of non-recyclable waste and wood per year in biofuel and will provide SAF for Amazon [AMZN] and DHL cargo planes, WSJ reports

An alternative to biofuel technology could be e-fuels or power-to-liquid fuels These use renewable energies like solar and wind to split water into hydrogen and oxygen Hydrogen is then combined with carbon monoxide, created from captured carbon dioxide Lufthansa [LFA] hopes to replace 5% of the kerosene at its Hamburg hub with power-to-liquid fuel within five years, using energy North Sea wind turbine Anna Mascolo of Shell [RDSA] believes that it “has the greatest potential” and can play a key role in decarbonizing aviation from 2030

Companies like Airbus [AIR] and ZeroAvia focus on hydrogen as a source of green fuel Simone Rauer of Airbus says this is the most promising option because it is produced from renewable energy Other countries are also keen to invest in this option and in September Airbus unveiled its zero-emission commercial aircraft concepts, Aviation Today reports

Airlines are likely to need significant government support in the form of taxes, incentives and subsidies to reduce SAF costs and increase production so that green fuels can compete with fossil fuels US President Biden pledged to “encourage the creation of new, sustainable fuels for aircraft” The WSJ also reports that the EU is considering quotas for airlines to use SAF

Air travel is likely to take some time to return to pre-pandemic levels, and other factors could threaten the recovery of the sector, especially for short-haul flights For example, plans to introduce new rail services connecting European cities, as part of ambitious EU climate change targets, could lead to an abandonment of air transport

If airlines receive substantial support to develop clean energy technologies, the future of the environment and of air transport could be sustainable in the long run This could ultimately benefit the actions of airlines and over the JETS ETF stock price, but when it comes to going green for airlines, investors should focus on long-haul

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Ebene News – CA – Can JETS ETF benefit if airline stocks embrace sustainability?

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