Air Canada's Growth Potential: Strong Passenger Revenue and Strategic Partnerships

Mid Caps 0 replies 0 votes 1167 views Tags:  Air Canadacodeshare agreementsGrowth Potentialpassenger revenueRPMstrategic partnerships
anuv javier 8 months

Air Canada (TSX:AC:CA) has shown positive performance and growth potential in recent months. The company's operating revenues in Q1 2023 increased by 89% compared to the same period in 2022. Diluted earnings per share also improved, reaching -$0.03, nearly reaching positive territory.

Passenger revenue per Revenue Passenger Mile (RPM) is a key metric for evaluating Air Canada's growth potential. Analysis of this metric reveals that passenger revenue per RPM has consistently remained higher than pre-COVID levels, with Q1 2023 recording 22 cents compared to 17.8 cents in Q1 2019. Despite the unusual impact of the pandemic on passenger revenue per RPM in Q2 2020 and 2021, Q1 2023's figures remain significantly higher than pre-COVID levels. Moreover, total revenue passenger miles in Q1 2023 were close to those in Q1 2019, with Q3 2022 surpassing pre-COVID levels. These figures indicate a rebound in passenger traffic and sustained higher passenger revenue per RPM.

Air Canada's balance sheet also shows positive signs, as the long-term debt and lease liabilities to total assets ratio decreased from September 2022 to March 2023, although it remains higher than the 2019 level. This decline suggests that the company is generating sufficient revenue to gradually repay the debt incurred during the pandemic, indicating improved financial stability.

Air Canada's strategic codeshare agreements with Emirates and flydubai have expanded its network in the Middle East, including countries like Saudi Arabia, Oman, and Bahrain. This expansion, coupled with increased revenues from the Atlantic region, indicates that international passenger revenue is likely to contribute more to Air Canada's overall revenue in the future.

Despite potential risks, such as the high level of long-term debt and the possibility of revenue growth plateauing, Air Canada has demonstrated strong performance and a growing passenger revenue per RPM. The strategic partnerships and positive financial indicators position the company well to overcome these risks.

Air Canada has shown robust growth in passenger revenue per RPM, indicating a willingness among consumers to pay higher prices for air travel. The company's expansion in the Atlantic region, driven by codeshare agreements, further supports its growth potential. Despite potential risks, the positive performance and strategic partnerships make the author optimistic about Air Canada's prospects.

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