Air Canada Remains Tethered To International Travel

Air Canada is an internationally focused airline. Roughly about 22% of 2019 capacity was utilized for domestic Canadian flights and less than 20% of capacity was for U.S. transborder flights. Air Canada’s strategy before the coronavirus pandemic was to capitalize on so-called sixth freedom traffic, which is flying (mostly) U.S. nationals on long-haul international routes with a layover in a Canadian airport. In our view, Air Canada came into the COVID-19 crisis in better financial shape than many U.S.-based peers, but its internationally focused business model will face considerably more stress than domestically focused U.S. peers.