Air Canada T.AC

Transborder market updte from Nat bank

[Tempo1]

A Nat bank report published march 20. (NB has a 31$ target for AC)

Summary:

U.S. Transborder market update - a deeper dive on specific airline performance

The U.S. transborder market is an important market for Canada’s airlines (especially to U.S. sun destinations in the winter months) and has seen a significant amount of capacity being added in the past year as Canada’s rapidly growing airlines like Flair, Porter and, prior to its bankruptcy/failure, Lynx, have introduced service to multiple destinations while also increasing the frequency of flights on existing routes. In this report, we detail where much of the U.S. transborder capacity has been added and how each carrier has performed on key routes from a load factor perspective.

Capacity growth this winter driven by new / rapidly growing Canadian airlines

Canada’s newer/rapidly growing airlines have significantly increased capacity on U.S. transborder routes this winter, especially relative to the overall transborder market, with Flair (+21.5% y/y), Porter (+123.6% y/y) and Canada Jetlines (+226.0% y/y) all flying considerably more seats to the U.S. in Q1/24. We also note that prior to its bankruptcy and cessation of operations, Lynx Air was also set to meaningfully increase transborder capacity in Q1 with the number of seats scheduled to be up 490.5% y/y and 31.5% higher than Q4/23.

A look at some route-specific load factors by airline

With Canada’s low-cost airlines aggressively adding new routes to the U.S. this winter, we compared the load factors (% of seats filled) on several key markets to see how each carrier did operationally in the early stages of the winter. Notably, Lynx’s load factor performance on many of its U.S. transborder routes in Q4/23 was poor, well below the level needed to break even on most routes. As for the other airlines, we note that Flair and Transat’s load factors on Toronto-Orlando were poor in Q4/23, below what WestJet and Air Canada generated. Flair’s performance was much better on the other routes we tracked with WestJet generating the highest load factors on all the routes we tracked on which it operated.

An extract from the full report:


Pricing comparison

With Toronto-Orlando being one of the most competitive U.S. transborder routes this winter, we looked at how each carrier servicing the route compares from a pricing perspective (looking at the total all-in fare including a checked bag for flights departing March 28th and returning March 31 st, which is a busy longweekend period). Interestingly, WestJet’s fare is roughly the same as Flair’s, noting that WestJet had the highest load factor on the route at ~90% in Q4 while Flair was tied for the lowest at ~68% (excluding Lynx). Canada Jetlines offered the lowest fare while Air Canada, which operates multiple daily flights on the route using both an A330-300 as well as an A321, was the highest.

[JuIieRichards]

Air Canada's Aeroplan program is extremely sticky.. so it can command pricing too. Also Aeroplan now has a million American members too. And the 6th Freedom traffic from US gojng international is mostly on AC. Limited on Westjet. 

[Rob8043]

Porter airlines - growing like crazy and a major threat to AC!!!