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Air Canada (AC. TO) and WestJet Airlines are expected to post higher earnings in 2024, according to Moody’s Investors Service. Analysts expect physically powerful demand from travelers, despite a potentially slower global economy.
Air Canada reported soaring profit in its latest quarter. Canada’s largest carrier also saw a higher year-over-year passenger count during the recent holiday travel season. Meanwhile, privately owned WestJet has boasted about “record-breaking guest volumes” from mid-to-late December.
However, the weakening global economy in 2024, the war in the Middle East, and potentially volatile fuel and hard-labor prices may threaten its post-pandemic recovery. At the same time, Air Canada and WestJet are facing an ever-increasing festival from cheap Canadian airlines such as Lynx Air and Flair Airlines.
“Air Canada and WestJet’s operating profits increased in 2023, and will also do so in 2024, surpassing pre-pandemic levels this year,” Moody’s analysts Aziz Al Sammarai and Paresh Chari wrote in a study published earlier this week. “The airlines will outperform their Canadian counterparts and there are a number of points that will drive their profitability growth. ”
They say passenger demand will continue to drive profits in 2024, “even as the economic expansion slows globally. “
Moody’s believes Air Canada is benefiting from strong demand for foreign fares and higher fares that passengers are willing to pay. Sammarai and Chari estimate that the airline generates about three-quarters of its profits from those routes.
In October, Air Canada’s executive vice president of network plans and benefits control called for a strong call “in almost every region where we operate, [and] in almost every segment in which we operate. “
At WestJet, newer, more fuel-efficient aircraft can simply reduce fuel costs. Following a strategic review, the Calgary-based airline is prioritizing routes to Western Canada. In October, it suspended service between Toronto and Montreal.
“WestJet expects those routes to generate higher profits than existing routes in Eastern Canada,” Al Sammarai and Chari wrote. “These measures are part of WestJet’s plan, announced in 2022, to return to being an efficient and cheap airline.
On Wednesday, Air Canada’s inventories were flat, trading at around $18. The stock has fallen from a recent summer high above $26, in line with participation.
WestJet has been wholly owned by Canadian joint-stock company Onex since 2019.
Jeff Lagerquist is a senior journalist at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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