12:23 PM EDT, 05/28/2025 (MT Newswires) -- The Canadian Airlines industry had its overall underweight rating confirmed in a Summer 2025 trans-Atlantic market update from National Bank, which says "industry capacity growth this summer remains modest", while "fare surveys still point to slight year over year yield growth".

Breaking it down, National Bank rates Air Canada Outperform with a target of $24.00 and Transat Underperform with a target of $1.50.

The bank sees total trans-Atlantic seat capacity up 3.2% year-over-year (departures now up 4.7% y-o-y) due to additional routes and frequencies having been added, along with some trimming of capacity on certain routes. Its initial analysis of the trans-Atlantic market for summer 2025 (which the bank defines as May 1 to October 31) showed total planned industry seat capacity (as of the end of February) between Canada and destinations in Europe up 2.2% y/y with total industry departures up 3.7% y/y. "We view this industry capacity growth as modest and still supportive of better pricing on trans-Atlantic routes," said analyst Cameron Doerksen.

National Bank's initial fare surveys done in January and late February showed average fares largely up y/y (as well as up sequentially from January to February) across the key routes tracked. However, the bank said, although still "mostly positive" in its mid-April survey, y/y comparisons began to moderate slightly while also showing a sequential decline compared to February for most of the routes. National's most recent survey (May 27) shows average fares "overall relatively mixed", but overall the bank still expects yields this summer to be up slightly y/y. It noted fuel prices have also eased in recent months and the current spot price sits at C$0.83/liter with the average since the beginning of May at C$0.84/liter (versus C$0.92/liter average last summer). "If prices remain stable for the remainder of the summer, fuel will be a modest tailwind to airline profitability," the bank added.

In the note, the bank said the trans-Atlantic market for Air Canada ( ACDVF ) "will again be one of the most important contributors to profitability in summer 2025." It added that it expects a "positive performance" on Europe routes this summer. "With the stock trading at just 3.4x 2025 EV/EBITDA versus U.S. airline peers at 5.6x, we continue to see Air Canada ( ACDVF ) shares as attractively valued."

National Bank said Transat's capacity growth to Europe this summer is "modest", and it continues to forecast profitability improvement in its fiscal Q3 and Q4. The bank expects management to provide an update on how summer bookings and yields are progressing when the company reports its fiscal Q2 2025 results on June 12. "We maintain our Underperform rating on Transat as we expect a long-awaited balance sheet refinancing plan could ultimately lead to dilution for existing equity holders."

Price: 19.50, Change: +0.15, Percent Change: +0.78