RE:RE:RE:RE:RE:Remember what can happen to the SP when the Street wakes upIn one of the previous Q (I think Q4), only 27% of AC's revenue came from domestic market (not including transborder). I believe that number would be lower in 2024 (because of many new international routes). As country/people, Canada is more connected to the world due to its higher immigration numbers esp in recent year.
For US airlines (Delta, United and American) this number is >60%. AC's strategy is to focus more on high margin business (premium, aeroplan, credit card, 6th freedom, transborder, international and superior service) and they have been able to collect right asset (airplanes) for this. Westjet and other players are more dependent on domestic business.
While Delta CEO spoke on serving more premium passengers, they (and United) are still behind AC in this strategy and won't improve much till they get their fleet (new planes, reconfiguration of seats) and service (IFE, servcice) upgraded. That will take time. That gives enough time to AC to capture and strengthen 6th freedom traffic from US. This shift is irreversible as AC is not looking for full flight loads out of single US orgin to single global destination.
AC has a very unique strategic advantage. AC sits right on top of world's largest (or 2nd) air travel market, which is served by global airlines. AC was last to start focusing on this opportunity (6th freedom) from 2011-12 onwards and still have lot of room to grow. They are not only going to capture this business (small portions) from US airlines but also from European, Middle Eastern and Asian markets/airlines.
Interesting fact: in 2023 AC flew 44.79M passengers, slightly lower than they flew in 2016 (44.85M) with FCF much higher than 2016. This year most likely they will end up with passengers equivalent to what they flew in 2017 or slightly lower than 2018, again with FCF much higher than 2017/18. When they will get to 2019 passengers (>50M) in 2025/26 with more fuel efficient planes, stronger aeroplan/credit card programs, 6th freedom (with 321 XLRs, 787-10, 737...), Cargo, their FCF will stay strong even with higher cost/capex. And compared to 2019, by 2025, Canada will have 10-12% more population; most of this incremental population (immigration) travels internationally by air. As a percentage of GDP/Population, in 2025, AC capacity will still be lower than it should be (for 55-57M passengers). And in case of severe recession, you can expect 10% demand destruction, still expecting 50M+ passengers for Air Canada.