Unfortunately for Air Canada (AC) a perfect storm has been brewing, with the “Buy Canada” movement, a weak loonie, and tempered economic forecasts all contributing to a 40% YTD decline.
An alarming report came out last month saying booking demand is down as much as 70% through September, but management sees something much more modest.
By mid-March, the bookings on the transborder market overall for the next 6 months, we're down about 10% year-on-year according to our data, and our own numbers were of comparable magnitude.
We got commentary more recently from Delta, who seems to be seeing a more aggressive demand drop off.
Yes. In Canada, we have seen a significant drop-off in bookings
While a deterioration of U.S. transborder demand would hurt, the segment represents roughly 20% of AC’s total passenger revenue…
… and has lower load factors than every other route segment Air Canada services.
Weak U.S. travel demand could have a silver lining for AC too, as competing U.S. airlines look to reduce exposure.
I think we will be looking at Canada and Mexico as places that we probably want to reduce our capacity levels as we move forward.
Bottom line: It’s been a challenging setup for AC of late with a weak Canadian economy and tariff concerns. The sentiment remains highly bearish, but it has shown torque to economic turnarounds in the past so it’s worth keeping an eye on.
