On Wednesday, National Bank Financial adjusted its price target for Air Canada (AC:CN) (OTC: ACDVF) shares, reducing it to Cdn$28.00 from the previous Cdn$30.00 while maintaining an Outperform rating. The firm's decision comes amidst observations of the current air travel market dynamics, particularly focusing on the performance of Air Canada.
The report noted that the demand for air travel is not decreasing, referencing recent data from the Canadian Air Transport Security Authority (CATSA). According to the latest figures, the seven-day rolling average of passenger traffic at Canada's largest airports has seen a 4.8% year-over-year increase. Additionally, so far this year, passenger traffic has consistently been higher than last year.
Airfare prices in Canada have shown signs of stabilization over the past three months. Statistics Canada's most recent data indicates that airfare prices in May were up 4.5% compared to the same period last year and 15.6% higher than in May 2019. These statistics suggest a recovery in pricing levels from the impacts of the pandemic.
Despite the positive indicators, there is an expectation of some yield erosion for Air Canada in the upcoming quarters. This is primarily attributed to challenging comparisons, especially on Atlantic routes. However, domestic prices are perceived to be relatively stable, which could be a positive sign for the airline's financial health.
The report by National Bank Financial provides an outlook on Air Canada's performance in the context of the broader air travel industry in Canada. With the adjusted price target and sustained Outperform rating, the firm acknowledges the airline's resilience in a competitive and dynamic market.
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