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Canadian Airlines’ Profitability Gaining Altitude

Lower Oil Prices, Weak Dollar Boost Bottom Lines

plane-wing over clouds GC

Lower oil prices and the weaker Canadian dollar boosted the Canadian airline industry’s bottom line to record levels in 2015, according to The Conference Board of Canada’s latest report.

Even though industry profitability is expected to subside from the record highs starting in 2016, pre-tax profits will remain very healthy over the next four years, says the board’s new Canadian Industrial Outlook: Canada’s Air Transportation Industry.

“The two biggest economic stories of 2015 – low oil prices and a weaker loonie – have wreaked havoc on Canada’s economy, but have been a net positive for Canadian airline transportation,” says Todd Crawford, senior economist at the Conference Board.

“However, it’s not all blue skies. Canadian air carriers are also contending with a weak domestic economy, which should restrain consumer spending and business travel. At the same time, new competition, particularly in the ultra-low-cost carrier segment, is heating up.

“Despite the low loonie, the number of US visitors to Canada did not grow as fast as expected last year. However, Canada’s accommodation industry should see a better year in 2016, as Americans are expected to react more favourably to a lower dollar.”

Highlights:

  • Canada’s airline industry’s pre-tax profits are expected to hit $1.5 billion in 2016.
  • At current oil prices, Canada’s air transportation industry realizes huge savings that, in turn, has pushed profitability to record levels.
  • The low-flying loonie has more Canadians travelling out of domestic airports and continues to attract foreign visitors to Canada.
  • The decline of the Canadian dollar relative to major currencies also provides a boost for the accommodation industry.
  • Profit margins for Canada’s accommodations industry are expected to remain relatively low reaching 4.2% by the end of 2016.
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