Citi analyst, Mr. Trent, maintains a positive outlook on Air Canada's long-term trajectory, citing strong premium cabin offerings, robust international demand, and growing loyalty/co-branded cash flow. However, he notes that the Canadian dollar's potential depreciation against the US dollar could impact cross-border passenger demand and seat mile costs. The analyst lowered his earnings per share projections for 2025 and 2026 due to lower expected RASM growth, slightly higher CASM, and higher depreciation/taxation. Despite these adjustments, Mr. Trent maintains a 'buy' recommendation on Air Canada shares with a target price of $26.50.
Air Canada appears to be on a solid, long-term trajectory, in light of its strong premium cabin offerings, ongoing strong international demand and as its loyalty/co-branded cash flow streams continue to spool up. However, in contrast with its U.S. network peers, 2025 cash flow looks less robust, while the potential for incremental Canadian dollar depreciation against the US$ is worth watching, with respect to both cross-border passenger demand and seat mile costs.
In a research report released Monday before the bell, Mr. Trent said the weakness of the Canadian dollar is likely to have a notable impact on the airline’s fortunes over the next 12 months. “On a positive note, Air Canada could see RASM-accretive TransPacific traffic growth, considering relative currency performance,” he said. “Over the past five years, the Canadian dollar has appreciated against the currencies of India, South Korea and Japan, all of which are important Asian destinations for the carrier. However, closer to home, U.S. dollar strength could at least modestly pressure cross-border demand, as Canadian dollar purchasing power for U.S. trips declines. Strong partnerships with United and Copa could help relieve some of this pressure, while greater co-branded card penetration might also help Air Canada to increase its US$ cash flow weighting.” The analyst lowered his 2025 and 2026 earnings per share projections to $2.30 and $2.96, respectively, from $3.15 and $3.55, citing a lower, expected RASM growth, slightly higher cost per available seat mile (CASM) excluding fuel, lower, expected fuel prices and higher depreciation/taxation. That led Mr. Trent to reduce his target for Air Canada shares to $26.50 from $28.50, maintaining a “buy” recommendation. The average target on the Street is $27.55, according to LSEG data. “While Citi maintains Copa as its favorite carrier, we nudge Delta Air Lines down two notches, now behind United and American.” he adde
AIR CANADA CURRENCY FINANCIAL PERFORMANCE EARNINGS TRENT
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