Air Canada T.AC

Airline Demand Trends ( A CIBC report)

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Airline Demand Trends Holding In Exiting The Summer Peak (Sept 15 2022)

Airline Traffic Monitor – September 2022

SUMMARY

Key Points

Canadian And U.S. Air Passenger Traffic Are Exhibiting Better Seasonal Trend Versus 2019: Air travel enters a seasonally slower period exiting August but looking at traffic data in early September, trends are holding in better in 2022 versus what we saw in 2019 for the North American market. In Canada, the air passenger count is down 8.65% versus the first week in July, compared to down 11.31% during the same period in 2019. Compared to the peak travel week during the summer, Canadian air traffic is down 11.82% this year, versus down 15.29% in 2019. Looking at the U.S. market, we see a similar trend.

North American Airline Commentary Remains Positive: TRZ, LUV and UAL updated their outlook while UAL and AAL maintained their outlook. For the latter, we still view this as a positive given concerns that a weaker consumer would pose a risk to the Q3/22 guidance provided by the U.S. carriers. The general commentary from the North American carriers is that the demand outlook for the fall/winter season remains strong.

Forward-looking Airline Capacity Data Looks Good: While we are seeing a seasonal decline in forward-looking airline capacity data, the underlying trends look healthy. October currently stands at 91% of the 2019 capacity level, and while we expect this to move around, OAG thinks it will settle in the 85% - 90% range which is a good position. Looking at September/October capacity, it is expected to average 441,000 seats versus 451,000 seats in July/August, or down ~2%. For reference, in 2019, July/August capacity averaged 524,000 seats and fell to 492,000 seats in the September/October period, or down ~6%.

Canadian Airline Website Activity Still Elevated: While we are seeing some slowdown in Canadian airline website traffic activity, it is still tracking ahead of pre-pandemic levels. We continue to view web traffic as a good proxy for booking trends and travel intentions.

One Summer Did Not Satisfy The Pent-up Demand To Travel: Hopper 2022 Holiday Travel Outlook report (published Sept. 12) reinforces our view that the pent-up demand to travel was not satisfied by one summer. The report noted that more than half of Americans plan to travel for one or both of the Thanksgiving and Christmas holidays this year with airfares expected to be at their highest in the last five years. Despite the U.S. airline industry leading the global recovery, we continue to see the pent-up demand to travel flow into what is seasonally a slower period for leisure travel. We believe a similar phenomenon is occurring in Canada.

EXTRACT from the detailed report:

3. Corporate Travel Indicators – Seeing Some Improvements

The corporate travel indicators we track remained stable this past month, and we are observing some improvements as we head into the fall season. We would highlight the following:

- Looking at ARC’s air ticket volume data, the average reading in August saw corporate segment ticket volumes down 28% vs. 2019 levels, similar to what was observed in July. However, the latest reading from the week of September 11 showed ticket volume down 25.5% vs. 2019 levels. This suggests business travel may be picking up post Labour Day.

- Corporate travel continues to be influenced by the progress of back-to-work. Looking at the Kastle back-to-work barometer as a leading indicator, August’s average reading was 43% (again), flat M/M. The barometer has been trending at ~44% since June and hit a peak of 45% mid-July.

- Looking at web traffic activity to gauge corporate travel sentiment, web traffic for both amexglobalbusinesstravel.com and tripactions.com remains at or above pre-pandemic levels, especially with web activities at amexglobalbusinesstravel.com trending in line with historical patterns. Aggregate web traffic for both websites were up 8% M/M. While web traffic data does not directly translate to bookings, it does continue to suggest a healthy sentiment/interest in the corporate travel segment.

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Everytime a relatively positive report comes out Rouge 10 is not long to post. Note I said relatively good as some of the numbers appear to be taken out of context.