Sky-high jet fuel prices and the health of the economy are major risks to Canada's airlines in 2005, but the stocks' fates are far from being out of executives' hands, equity analyst Ben Cherniavsky of Vancouver-based Raymond James told Report on Business Television.
At Air Canada, discipline is required lest the nation's largest airline be tempted to flood the domestic market with extra capacity to try to squeeze out rivals WestJet Airlines Ltd. and Jetsgo, Mr. Cherniavsky said. Since restructuring, Air Canada has been shrewd with domestic capacity, while beefing up international routes, he added.
"My biggest concern next year is that leads them to view the [domestic] market as a growth market where they'll add capacity again," he said. "There's just not enough room for three carriers to be growing their domestic operations, so the wisest thing for Air Canada to do would be . . . to ignore that and focus expansion in the less competitive markets like Latin America and Asia-Pacific."
Mr. Cherniavsky raised his 2005 share profit estimates for Air Canada on Dec. 8 to $3.75 a share from $1.50, and lifted his share target price to $40 from $25.
Air Canada shares fell 15 cents yesterday to close at $35.40.