Canadian Industrial Outlook: Air Transportation—November 2019

Consolidation wave—Despite global and domestic stellar growth in recent years, the global airline industry is being reshaped by a series of airline failures in Europe and by two important acquisitions in Canada.

Slower growth domestically and globally—Economic growth is slowing in the United States and China due to trade tensions. In Canada, consumers are becoming more cautious with spending on discretionary items. In turn, this is weighing on passenger growth and putting an end to five years of outstanding industry performance.

Major industry accounting change—Following the adoption of IFRS 16, airlines now have to incorporate long-term aircraft leases into their balance sheet. For Canadian airlines with leases denominated in U.S. dollars, this change can lead to major fluctuations in foreign exchange losses and gains. This, in turn, affects airlines’ bottom line.