RBC: Lynx bankruptcy protectionConnecting The Dots: AC flash read-through - Lynx Air filing for bankruptcy protection
Sentiment: Positive
Our take:
We view the announced closure of Lynx Air as a positive for AC as it reduces domestic price competition and removes excess capacity. We see AC benefiting from the rationalization of the competitive landscape as LCCs struggle with rising costs and limited ability to raise prices, something AC can do relatively better given the value-add of amenities and service. However, we note the closure exemplifies that operational challenges and rising costs are impacting all airlines. We note Lynx operated nine 737 Max 8s, so its impact is limited, but had planned for up to 48 737s by 2028; see our fleet tracker below. This results in a minor decrease this year in the non-mainline fleet as a percentage of total fleet from 24% to 23%, though it is more pronounced in out-years, moving from 29% to 25% in 2028, given the fleet expansion will not take place, and therefore removing some competitive pressure.