Top Canadian Airline Stocks to Watch for 2022

Canadian airline stocks have been dealing with the same ups and downs as the rest of the world over the last two and a half years. Wild swings in COVID-19 and its variants have caused travelers to start and stop travel plans throughout that time. Now Canadian airline stocks are faced with a potential global economic slowdown.

When the COVID-19 pandemic initially brought the globe to an immediate shutdown in the spring of 2020, airline stocks were some of the worst-performing stocks. Since the virus is airborne, air travel was severely restricted. The restrictions were put in place because airplanes hold many travelers in a small space. So, a single COVID-19 case could quickly spread to every passenger on the plane.

If passengers on a flight were to get infected, the entire flight was rendered as a host carrying the infection from one country to another. Due to the high probability of transmitting the virus, governments worldwide canceled almost all international flights.

As vaccines gained approval from the FDA, things started to look better for airline companies like Canadian airline stocks later in 2020. As vaccinations rose and travel restrictions began to lift, more virus waves came. For instance, Christmas travel caused virus cases to spike, and travel restrictions came back into play in 2021.

Then in early 2022, the more contagious Omicron variant began to run its course. Countries continued to ramp up vaccination, which proved effective against the Omicron variant. Vaccinations combined with herd immunity quickly caused a decrease in cases.

Demand for air travel is high, but now Canadian airline stocks face a global economic slowdown. If recession fears are wrong, Canadian airline stocks could see the gains that investors have been waiting for.

Best Canadian Airline Stocks to Buy

No. 5 Air Canada (TSE: AC)

AC is the biggest airline in Canada and one of the biggest in the world. Like all other airline stocks, Air Canada has had a long road to recovery from the COVID-related slowdown in air travel. But the company is optimistic. According to its recent investor slide deck, Air Canada believes ASM (average seat miles) in the summer of 2022 will reach 80% of its 2019 levels. After that, ASM will reach 85% – 90% in the summer if 2023, and 90%-95% in 2024.

Though Air Canada believes air travel will eventually reach its pre-pandemic levels, leisure and business travel will recover at different paces. The company expects leisure demand to exceed 2019 levels by 2023. On the other hand, Air Canada’s estimates for business travel will only reach 75% to 80% of 2019 levels by 2023.

Air Canada has ambitious sustainability goals, including a 20% reduction in greenhouse gases from air operations by 2030 and a 30% reduction from ground operations. The airline giant has a market cap of 5.44 billion CAD. The stock does not pay a dividend.

No. 4 Cargojet (TSE: CJT)

CJT is Canada’s leading cargo airline stock. Rather than moving people around the world, Cargojet moves many of Canada’s imports and exports worldwide. In its first-quarter 2022 earnings press release, the company noted that sales jumped 47% to $233 million from $160 million in the first quarter of 2021. In addition, Cargojet made $42.7 million in cash flow for the quarter. The stock is down nearly 16% for the year. It also pays a modest dividend yield of .8%.

No. 3 Transat (TSE: TRZ)

TRZ is a much smaller Canadian vertically integrated airline stock. It has been the subject of multiple takeover attempts recently. First by Air Canada, then by telecom company Quebecor (TSE: QBR). Both attempts failed.

The company’s first-quarter earnings report said that travel bookings recovered from the Omicron variant. Sales for the quarter popped 30% to CAD 358 million from the prior quarter. Sales at that level are 40% of pre-pandemic levels. Transat is optimistic about the summer of 2022. The earnings report also said the company would offer 1,200 itineraries compared to about 500 in 2019.

Transat stock has a smaller market cap of just CAD 126 million. The stock is down 22.5% this year and does not pay a dividend.