Vacation travel company Transat AT is facing a barrage of headwinds in 2016, putting more pressure on a company that’s already can not boost organic growth, based on a brand new analysis by CIBC.
As an effect, the financial institution has downgraded Transat to sector underperform from sector perform and cut its price target on the stock to $7 from $8.
The cut reflects “the intensifying competition in leisure travel, especially as the scheduled carriers shift capacity from Alberta into Eastern Canada,” analyst Kevin Chiang wrote in a note to clients.
Related
- How airlines are cutting fares to counterbalance the weak economy and boost demand
-
-
-
WestJet Airlines Ltd. revealed the depth from the downturn in oil-dependent Alberta and it is impact on airlines if this released disappointing quarterly results the 2009 week. WestJet is shifting capacity from Alberta to other parts of the country, but expects unit revenue to fall for the short term because it discounts fares to stimulate demand.
“While Transat’s subjection to Alberta is comparatively small (about nine percent of total origin travellers), we expect it to be facing increasing competition from scheduled carriers because they reallocate their network,” Chiang wrote.
The weakening Canadian dollar, Zika virus and the possibility of a pilot strike are all additional headwinds that could put pressure on Transat’s stock this winter.
Transat’s pilots voted 97 percent in favour of a strike that would hit the airline right before the busy March break season if your deal isn’t reached before this.
And a number of Transat’s key winter markets, including South and central america and also the Caribbean, are seeing tourism influenced by the outbreak of the mosquito-borne Zika virus.
