Better Buy: Air Canada Stock or WestJet Airlines?

Is Air Canada (TSX:AC) or Onex Corporation (TSX:ONEX) the better buy for exposure to the airlines sector? Let’s dive in.

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The world has officially emerged from the disruptions of COVID-19, and as such, airlines have been in focus for many investors for some time. Looking at the stock charts of many of the top airlines, it’s been a bumpy ride. However, recent price action is certainly pointing in the right direction.

Now, with most airline companies getting back on their feet, should investors focus on this trending sector to secure long-term gains? With earnings on an upward trajectory and the sector in a confirmed uptrend, here are two Canadian air stocks that are worth buying. 

Air Canada

Operational since 1937, Air Canada (TSX:AC) is Canada’s largest air service provider. Apart from domestic flights, this company provides U.S. transborder, international, and air cargo services in around 50 nations.  

Impressively, Air Canada is planning to expand its passenger capacity by 23%. The company is planning to do it by the end of this year, and this move will help it cater to the increase in travel volume. 

Recent reports also show rather solid performance from Air Canada in its first quarter of this year. Passenger revenues reached US$4.088 billion, which was double the figure in the first quarter (Q1) of 2022, on a 53% operated capacity rise. Operating revenues have increased to US$4.887 billion, which is 90% more than what was achieved last year. 

According to the company, this strong performance is a result of strong demand and the proper execution of their strategies. Now, to further leverage this demand, Air Canada has strategically expanded its winter sun network. 

Travelers can now avail of four new routes from Toronto and Montreal to Fort-de-France, La Romana, Los Cabos, and Monterrey. Apart from this, the airline is expanding its capacity at its Vancouver hub to enable passengers to reach popular vacation spots like San Diego, Las Vegas, Mexico, Miami, Phoenix, Florida, and the Caribbean.  

Onex Corporation

Onex (TSX:ONEX) is a private equity firm that specializes in acquisitions. It purchased WestJet in December 2019 via its subsidiary, Kestrel Bidco. 

As of late May, WestJet finalized its deal to buy Sunwing Airlines and Sunwing Vacations. The latter being a tour operator will enable the company to support its vacation package offerings, thus acting as an instrumental pillar. 

This deal will enable WestJet to expand its operations in East Canada and compete with Transat AT and Air Canada.  

Now, coming to the parent company, Onex is a favourite among investors. According to recent reports, almost 45% of the company belongs to retail investors while 39% is held by institutional investors. 

Moreover, as per data on April 29, 2023, Onex’s vice chairman Anthony Munk bought company shares worth $1.9 million, increasing his holdings by 5.4%. 

These figures show optimism regarding this stock among the institutional investors and their belief in its future growth potential.  

Bottom line

Given the current scenario of increasing travel volume, both companies have the potential to generate significant long-term gains. Thus, while both may be considered excellent options, Air Canada is likely more of a pure-play option for investors seeking exposure to airlines alone. Onex is a more diversified option, better suited for investors seeking a broader, more diversified portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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