During the 2022 Industrial Tour de Montreal, BMO Capital Markets sat down with Air Canada (TSX: AC) CEO Michael Rousseau, and CFO Ammos Kazzaz. They are said to have left the meeting with greater confidence in the company in general, specifically with the fundamentals and the management’s ability to execute its COVID recovery plan as the company continues to focus on cost efficiencies and place closer attention to customer experience.
Air Canada currently has 16 analysts covering the stock with an average 12-month price target of C$27, or an upside of 45%. Out of the 16 analysts, four have strong buy ratings, nine have buy ratings, and the last three have hold ratings on the stock. BMO Capital Markets currently has a C$30 long-term price target and outperform rating on the stock.
During the meeting, management said they have seen an uptick in demand bookings across all regions, with more leisure travelers paying for premium seats. They also see stronger demand in places such as Europe and the Caribbean, which are seeing above pre-pandemic levels of travel, BMO comments.
Additionally, management pointed to Aeroplan as a big membership booster for the company. During the third quarter, Aeroplan added almost a million new members, the largest single-quarter increase since the program relaunched in 2020. This is partly due to COVID, while also being partly due to the “increasing number of alliances not only on the credit card side but other retailers and service providers,” BMO says.
BMO adds that they originally thought the Aeroplan relaunch was meant as a loyalty program but now is “more relevant to a much larger addressable market.” They believe that Air Canada benefits from a stickier customer base and earns a higher yield on mile redemptions. Not to mention the data that comes from the program, which has helped improve marketing efforts.
Lastly, Air Canada’s CEO and CFO strongly emphasized cost discipline, suggesting that their cost reduction efforts will mitigate additional inflationary cost pressures on the company. At the same time, it remains on track to hit its medium-term adjusted-CASM target.
Information for this briefing was found via Edgar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
