Q4 so far, Q1 and outlook As fear mongering is at its best, here is what is happening in the background:
Capacity: Tracking flights on (
https://flightaware.com/live/fleet/ACA?;offset=40;order=ident;sort=ASC). At any given time of the day, Nov flights ranged from 60-78. Starting from Dec, flights increased to max of low 80s. From mid Dec, the real change started. First time, since April 2020, there were 90+ flights in air. Yesterday, there were max of 96 flights in air. ~50 widebody flights and rest narrow body. This is pretty much in line with their forecast of Q4. I will use ticket fares as proxy for loads.
- AC has been managing capacity well by consolidating flights over the pandemic and I assume they are still doing the same.
- This is the first time we are seeing ~50 Widebody planes in air since April 2020. Widebody planes are going to sun destinations. No need to send bigger planes if there was not enough demand and have narrow body parked.
Demand: In absence of demand numbers, I have been tracking ticket pricing on key markets. Latest is as follows:
- Canada – India: (never seen these kind of prices; 3 flights a day)
- 1 week out: Economy full. Cheapest fare is ~$8000 return (mixed business fare)
- 4 weeks out: Cheapest economy fare is ~$3000
- 8 weeks out: Cheapest economy fare is ~$ 2800
- YYZ – SFO:
- 1 week out: Almost full. Cheapest economy fare is ~$1200 return
- 4 weeks out: Cheapest economy fare is ~$600
- 8 weeks out: Cheapest economy fare is ~$600
- YYZ-YVR:
- 1 week out: Cheapest economy fare is ~$800 return
- 4 weeks out: Cheapest economy fare is ~$500
- 8 weeks out: Cheapest economy fare is ~$500
- YYZ-LHR: ~ $900-$1000, which is average fare. Nothing special about it.
- YVR-SYD: ~$2200. This fare is excellent.
It also noted the more than 50% fares sold are not cheapest fares (CMO comments from analyst calls), because lowest fare doesn’t qualify for many offers like full aeroplan points,refund, seat confirmation, bags, etc.
Also noted is that many routes (Sun destinations, US destinations) have widebody planes. It means demand for these destinations is either solid or demanded a flight consolidation. It means for Q4 at least, demand is holding. Only 9 days left of Q4. So far Q1 seems to be holding. My assumption is that there will be some cancellations because of fear mongering but over next few weeks bookings will come back again even stronger than before.
Outlook: If there was to be a full lockdown, we would have seen it by now. March 2020 was different as scientists were going in blind without any information on covid. Now, key is to respond promptly without full lockdown. South Africa has already started to report reduction in hospitalization and omicron cases. To begin with, their omicron hospitalisation rates were much lower than Delta. (
https://www.bloomberg.com/news/articles/2021-12-17/s-africa-says-hospitalizations-in-omicron-wave-much-lower).
Yes, South Africa is a different weather system and age demographics than Canada. But Canadians are most vaccinated in the world and much higher than South Africans. Key is booster shots. Almost 25% of Ontarians have it. Within next few weeks most will get booster shot and kids will get their 2
nd, just in time for spring and summer season. Moderna has confirmed that their booster shot will protect us from omicron (
https://www.cbc.ca/news/health/moderna-booster-dose-coronavirus-omicron-1.6292454).
I expect another booster (annual) shot starting next fall for everyone. This will be new life for next few years.
Expect another quarter (Q4) of positive cash flow. In my last posts I had suggested $250M of positive cash flow. I still hold that outlook.