Yahoo Finance Air Canada, WestJet profit to top pre-COVID highs in 2024: Moody's
Air Canada (AC.TO) and WestJet Airlines are set to book higher profit in 2024, according to Moody’s Investors Service. Analysts predict robust demand from travellers, 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, a weaker global economy in 2024, war in the Middle East, and potentially volatile fuel and labour costs could threaten their post-pandemic recoveries. At the same time, Air Canada and WestJet face growing competition from low-cost Canadian carriers like Lynx Air and Flair Airlines.
“We believe operating profit increased for Air Canada and WestJet in 2023, and will also do so in 2024, exceeding pre-pandemic levels this year,” Moody’s analysts Aziz Al Sammarai and Paresh Chari wrote in research published earlier this week. “These two airlines will outperform their Canadian peers, and different factors will drive their profitability growth.”
They say passenger demand will continue to support profit growth in 2024, “even as economic growth slows globally.”
Moody’s sees Air Canada benefiting from strong demand for international travel, and the higher fares those passengers are willing to pay. Sammarai and Chari estimate the airline generates nearly three-quarters of its revenue from these routes.
In October, Air Canada's executive vice-president of network planning and revenue management called for strong demand “in almost every single geography that we operate in, [and] in almost every single segment that we operate in.”
At WestJet, newer, more fuel-efficient aircraft could lower 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 these routes to generate higher profit than existing routes in Eastern Canada,” Al Sammarai and Chari wrote. “These various moves tie into WestJet's plan, announced in 2022, to transition back to operating as an efficient, low-cost carrier.”
On Wednesday, Air Canada shares were virtually flat, trading at about $18. The stock has fallen from a recent peak in the summer above $26 per share.
WestJet has been privately owned by Canadian private equity firm Onex since 2019.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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