Post by
Veecee1 on Nov 21, 2024 7:38am
Higher yields
Airline capacity growth to sun destinations set to moderate, analyst says, with higher fares likely
As Doerksen wrote in his report, higher capacity typically leads to lower prices for consumers, so a pullback in capacity growth would result in higher fares. But softening consumer demand may force airlines to offer discounted fares. Doerksen highlights that several airlines have recently been offering promotions on winter vacation packages “in an attempt to spur early booking activity.” “However, with interest rates in Canada expected to continue declining through the remainder of the year, consumer confidence may improve, which could be positive for vacation demand in 2025. Combined with a more rational capacity growth environment, pricing may strengthen relative to last winter as the season progresses.” As capacity growth moderates, Doerksen believes Air Canada stands to benefit and the winter travel season could be a positive catalyst for the airline’s stock.
“Whereas profitability on sun destination routes last winter was hurt by too much industry capacity, we are more optimistic that bottom line results in these markets will show improvement this winter,” Doerksen wrote.
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