The Canadian stock market rallied in the first three quarters of 2023, fueling increased interest in high-risk assets such as airline stocks. The airline industry, closely tied to economic trends, experiences increases in ticket sales during periods of confidence and spending. As the economy emerges from the disruption of the Covid-19 pandemic, airline stocks are currently thriving.
Here are the two stocks to choose from if you wish to invest in the aviation industry in November 2023.
Air Canada
Air Canada (TSX: AC), Canada’s largest airline, beat market expectations with earnings per share of $1.35 on revenue of $4.04 billion in the second quarter (Q2) of 2023, reflecting effective cost management. The company’s strategic initiatives, partnerships and diversification efforts contribute to its growth potential, especially in international markets, which accounted for nearly 70% of growth in Q2 2023.
With a 42% increase in premium income, Air Canada is demonstrating its ability to capture more market share, supported by favourable prices and strategic partnerships.
Addressing the decline in cargo revenue, the company expanded its freighter operations, increasing the fleet from two Boeing 767 aircraft in Q2 2022 to six in Q2 2023. This adaptive approach highlights Air Canada’s effective management of market shifts.
Operational efficiency is evident in the increase in revenue per mile (RPM) across sectors despite a 9% increase in total operating expenses. The company continues to focus on cost management to optimize operations in times of inflation and capacity expansion. Strategically positioned, Air Canada is poised to take advantage of future growth opportunities.
Furthermore, Air Canada attributed robust revenue and earnings growth in the third quarter to its international network expansion, hub scaling, and strategic partnerships. Operating revenue for the third quarter was $6.34 billion, a 19% increase, primarily due to increased passenger revenue. Adjusted core earnings before interest, taxes, depreciation, and amortization climbed to $1.45 billion with a margin of 28.8%, reflecting an increase of $771 million.
Onex Corporation
WestJet Airlines has long been owned by conglomerate Onex Corporation (TSX: ONEX). Accordingly, we’ll have to dive into this company’s financials to get an idea of how WestJet has been performing of late.
Onex Corporation announced a Q4 dividend of $0.10 per subordinate voting share payable on January 31, 2024, to shareholders with a record date of January 10, 2024. Founded in 1984, Onex manages $49.5 billion in assets worldwide and $7.9 billion in equity capital.
With offices in Toronto, New York, New Jersey, Boston, and London, the company emphasizes shareholder value through share buybacks.
Despite concerns about earnings quality, Onex has maintained its dividend for 37 consecutive years, reflecting its commitment to shareholder value. The company’s strong liquidity position exceeds short-term liabilities and reassures investors of its ability to meet immediate obligations.
Which is the better buy?
Overall, Air Canada remains the top airline in Canada, and that’s unlikely to change anytime soon. For those looking to bet on the Canadian aerospace market, this remains my top pick in this regard.
