Finance

Despite some airlines collapsing or consolidating, Canadians air passengers can expect more seats and even some deals heading into the Thanksgiving long weekend this year.

Data from aviation analytics company Cirium shows that across the major Canadian airlines, total capacity is expected to be up by about 30,000 seats for the Oct. 11-14 weekend compared to Thanksgiving dates in 2023.

That’s despite the closure of Lynx Air, which folded in February of this year, and the consolidation of Swoop into WestJet.

While Air Canada, Air Transat, Flair and WestJet are all expected to see low-single-digit increases in seat capacity, the bulk of the improvements will come from Porter Airlines, with a jump of 37 per cent year-over-year.

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“Most notably, Porter has been expanding aggressively, not just across Canada, but North America,” says Amra Durakovic, head of communications for Flight Centre Travel Group.

Seat capacity is more of a mixed picture for the Thanksgiving weekend in the domestic market, with WestJet, Flair and Air Transat seeing declines, while Air Canada posts a modest gain and Porter again leads the pack in growth.

Cirium notes that Porter has been scaling up in recent years, with plans for an additional 34 jets currently on order.

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“They’ve expanded their fleet considerably,” says Jim Hetzel, director at Cirium. “However, I think overall they’re charging a little bit more for that.”

Cirium’s analysis of domestic fares as of July show Porter is the only airline reporting a year-over-year price jump of four per cent. Air Canada’s average fares are down one per cent while other airlines report sizeable annual declines of 14-17 per cent.

As of July, the cheapest one-way domestic fare in Canada belonged to Flair at roughly $84, while Air Canada topped pricing at around $300. Cirium’s analysis is based on economy class airfare before taxes or additional fees.

But Lesley Keyter, who runs the Travel Lady agency in Calgary, tells Global News to be wary of what’s included in the price of a ticket when you’re booking, as airlines are increasingly asking travellers to pay for carry-on baggage or seat selection.

“If you see a really cheap fare and then you start adding on, ‘I have to pay this much for a seat and this much for a checked bag and this much for carry on,’ at the end of the day, it goes up a lot,” she says.

Keyter says that she’s seen airfares decline heading into Thanksgiving because, despite the loss of Lynx, airlines are getting more competitive with each other for Canadian’s money.

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“If we’re talking about domestic travel and for the next couple of weeks or so, I think there’s a lot of empty seats out there and the airlines are vying with each other to fill those seats,” she says.

Durakovic says that more seats generally translates to cheaper airfare thanks to more competition in Canadian skies. As such, she says she’s also noticed “remarkable deals” on airfare for the Thanksgiving weekend.

Those flying from Toronto to Vancouver can get a round-trip ticket for $500 from the likes of Air Canada and WestJet, she says, but those willing to depart on the Saturday before Thanksgiving could scoop airfare around $200 on Porter with a Monday return.

Durakovic recommends that, whenever possible, Canadians keep their dates flexible and avoid flying when others are also trying to book. She says that right now, Thursday, Oct. 10 is looking like the more expensive day to fly “across the board” ahead of the Thanksgiving long weekend.

Keyter says the off-season months like October have become more popular among Canadians who are flying overseas. Crowds are usually less dense in the hotspots in Europe and Asia, and airlines are eager to offer deals to accommodate flights during the shoulder seasons, she explains.

“So a nicer time for people to go away is when it’s a little bit quieter, and they’re scoring because they’re getting lower airfares,” she says.

— with files from Global News’s Anne Gaviola

&copy 2024 Global News, a division of Corus Entertainment Inc.

In today’s uncertain markets, investors increasingly turn to dividend-paying stocks as a reliable strategy for generating passive income and enhancing portfolio stability. Schwab U.S. Dividend Equity ETF™ (NYSE:) stands out because it consistently delivers strong returns, outperforming the S&P 500 for the past five years. SCHD leads the way when executing a dividend growth strategy and building a well-rounded, income-focused portfolio.

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The ETF’s selection process prioritizes companies committed to rewarding shareholders through sustained and increasing dividend payouts. To be eligible for the fund, a company must have a history of at least ten consecutive years of uninterrupted dividend payments. This strict requirement eliminates companies with inconsistent dividend histories or susceptibility to economic fluctuations.

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Next week, Q3 ’24 earnings start and the majority of the interest on the part of investors will be Friday, October 11th’s financial services earnings, from JPMorgan Chase & Co (NYSE:), Wells Fargo & Company (NYSE:), Blackrock (NYSE:) and BNY Mellon (NYSE:).

What’s interesting about this table from Briefing.com is that of the financial services companies reporting next Friday, 10/11, only one – BNY Mellon – shows y-o-y EPS growth expected for Q3 ’24.

For the sector as a whole, financial services is presently looking for just +1.8% EPS growth in Q3 ’24, versus the +23.5% compare in Q3 ’23, and +4.3% revenue growth expected in Q3 ’24, vs +5.1% in Q3 ’23.

That’s a tough EPS compare (as it stands right now).

The fact is though a few quarters since Q3 ’23 have had low expectations for the financial stocks coming into the quarter’s releases, and then the numbers were quite good: low credit reserves, strong capital market activity, mid-single-digit corporate loan growth, relatively healthy home sales (i.e. mortgages, etc.) all generate positive EPS attribution, particularly for the bigger banks.

Here’s a table that’s a little wonky, but readers can see the progression in EPS and revenue growth for the Q4’23 through Q2 ’24:

LSEG is the source of these growth rates. The black-bordered line is the financial sector.

Surprising to me was that the financial sector was expecting just +4.8% EPS growth in Q1 ’24, and the actual was more than double that amount at +13.1%. Q2 ’24 same way +8.8% expected at the start of the quarter, while actual was +20.7%.

Revenue growth has been relatively consistent at 5% – 7% since Q4 ’22.

Who wins in today’s environment ? Same ‘ol, same ‘ol, i.e. major banks like JPM, and Bank of America Corp (NYSE:), Wells Fargo (WFC), which should reflect very positive credit profiles and the addition of strong capital markets activity. Goldman Sachs (GS) and Morgan Stanley (MS) too.

The regional banks will likely only start to outperform when the Treasury yield curve steepens and the Treasuries bought for bank portfolios, begin to “ride the yield curve”. (You have to have read Homer & Leibowitz in business school to get that reference.)

S&P 500 data:

• The saw it’s quarterly bump this week to $266.66 from $257.47 last week, or roughly the amount that was expected in last week’s update.
• The PE on the forward estimate is 21.5x versus 22x last week;
• The SP 500 earnings yield jumped to 4.66% with the quarterly bump versus the 4.48% last week;
• The “kinda” red flag around Sp 500 EPS is that Q2 ’24’s EPS estimate started the quarter out at $59.22 on June 30, and ended up at $60.40 as of 10/4/24, which is just a 2% increase. Also the upside surprise for SP 500 EPS this quarter was just 4.6% versus the 6% – 8% in the previous quarters.

It’s not a “sell everything’ tell, but it’s clear that the sell-side may be pulling in their horns on expected Q3 ’24 SP 500 EPS growth.

That’s understandable too.

For the SP 500 as a whole, EPS growth is expected at 5% in Q3 ’24, on 4.7% revenue growth.

Summary / conclusion:

This blog will be out with a JP Morgan preview before Friday morning, along with some other financial names, but this blog doesn’t model Blackrock or Wells Fargo. This blog turned a little more conservative on JPMorgan before Q2 ’24 earnings were released, since there is a good chance that Jamie Dimon will be leaving the bank, possibly within 3 years, and maybe even sooner since if Republican nominee Trump is elected, he has indicated that Jamie Dimon will be a candidate for Treasury Secretary. JPM is the most expensive large bank on a book value basis, but the fact is Jamie has run that bank like a well-oiled machine since even pre-2008.

The nonfarm payroll report will likely give the “econ bulls” some ammunition as the Atlanta Fed’s “Nowcast” shows expected Q3 ’24 GDP growth at +2.5% (as of October 1 ’24).

That’s still healthy growth, and that likely continues to bide well for continued health in consumer credit metrics like credit card chargeoffs, home equity, auto loan delinquencies, etc., etc.

***

Disclaimer: None of this is a recommendation or advice, but only an opinion. Past performance is no guarantee of future results. All SP 500 EPS and revenue data is sourced from LSEG. Investing can and does involve the loss of principal, even for short periods of time.

Two low-cost airline stocks were moving in opposite directions Friday after a report by the Wall Street Journal that one of them, Spirit Airlines (NYSE:), was exploring bankruptcy.

The report sent Spirit stock plummeting as much as 35% on Friday at the opening bell to $1.45 per share. As of 3:15 p.m. ET, it was at about $1.68 per share, still down 25%.

Not surprisingly, its chief rival, JetBlue Airways (NASDAQ:), was taking off, soaring some 16% to over $7.40 per share on Friday.

Spirit facing financial woes

JetBlue and Spirit are two of the leading low-cost carriers in the U.S. and they had been in merger talks for much of the past two years.

JetBlue was looking to acquire Spirit to better compete with the larger carriers — American, United, Delta, and Southwest. However, in January, a federal judge rejected the deal, saying the merger would take a low-cost carrier off the market, thus reducing options for consumers.

However, some nine months later, Spirit is reportedly exploring filing for bankruptcy, as the Journal first reported.

On Friday, Bloomberg reported that efforts by Spirit to restructure its debt with bondholders had hit a snag. Without a deal, reported Bloomberg, a chapter 11 bankruptcy filing would hard to avoid, although nothing was certain or imminent.

In Spirit’s second quarter earnings report, released Aug. 1, the company said, “we remain in active discussions with the advisors to the noteholders to address the upcoming debt maturities and will provide updates on our progress when appropriate.”

Spirit has more than $3 billion in long-term debt and about $1.1 billion in secured bonds coming due in less than a year, according to the Journal report. It also has negative cash flow and had a net loss of $193 million in the second quarter.

Since the merger deal fell apart in January, Spirit has plunged into penny stock territory, dropping from almost $17 per share to its current $1.64 — a 90% decline.

JetBlue takes off

JetBlue stock, as the main competitor to Spirit, took off on Friday, rising around 16% to around $7.40 per share.

Since the acquisition was rejected last January, JetBlue stock has climbed about 48% and is up around 32% year-to-date.

JetBlue has been busy reinventing itself since then, hiring a new CEO, Joanne Geraghty, and launching a new strategic plan called JetForward. The JetForward plan is designed to drive efficiencies, cut costs, and refocus the airline on its most profitable routes and regions, mainly the Northeast and Florida.

In the second quarter, JetBlue topped earnings and revenue estimates, returning to profitability after three quarters of net losses. The airline also got a vote of confidence when activist investor Carl Icahn of Icahn Enterprises took a 10% stake in the company.

Clearly, JetBlue will be the main beneficiary of Spirit Airlines struggles, but investors may want to be cautious, as JetBlue stock has already had a sizable increase this year, and it is in a period of transition.

While JetBlue appears to be on a good path, it would be wise for investors to gain more insight into its progress and wait for the results of its Q3 earnings report around October 22.

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