Post by
Tempo1 on Sep 18, 2024 8:32am
NBF: Airfares
August CPI data shows airfares in Canada below 2019 levels
Airfares in Canada down 4.8% y/y in August and down 0.6% versus 2019 according to CPI data Canadian CPI data for August was released this morning, and the air transportation component decreased y/y for the second straight month and was below August 2019 (pre-COVID). StatCan undertakes a fairly comprehensive monthly fare survey, and based on this, we note the following: • Relative to August 2023, the index was down 4.8%.
The y/y decrease in August follows a 2.7% y/y decline in July and a 2.0% y/y increase in June.
Fares were down 8.9% sequentially after increasing 8.4% sequentially in July.
• Relative to August 2019, the index was down 0.6%.
The August decrease versus 2019 was the first decline relative to 2019 since July 2021
NBF takeaway
Although airfares in Canada were relatively strong through the first half of 2024, CPI data shows that fares have weakened the last two months with the August reading coming in below 2019 levels for the first time in three years. Our own fare surveys for Air Canada suggest that domestic pricing is still generally higher y/y on the key routes that we track, but we suspect that airfares on international routes remain under pressure due to more difficult comparisons as well as excess industry capacity. Recall that Transat reported its fiscal Q3 (ended July) results last week and indicated that yields so far in fiscal Q4 are running 9.7% lower y/y and while still early in the booking curve, management notes that pricing pressure looks set to continue into the winter as consumers are more cost conscious (although it does expect overall industry capacity to be much more disciplined).
We value Air Canada shares at 24$ by applying a 4.0x EV/EBITDA multiple to our 2025 EBITDA forecast.
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