Worldwide codeshares
Despite having a name that defines it as a Canadian airline, Air Canada operates beyond Canada’s borders as well. Part of this is done through flying actual flights but the airline’s inclusion in the Star Alliance helps to expand the airline’s total network. United Continental Holdings Inc (NYSE:UAL) is also part of this alliance and, being the world’s largest airline, brings a massive route network both in the U.S. and abroad.
In the airline industry, network size matters — it’s a critical factor in moving passengers toward major flights and making service available to as many passengers as possible. Air Canada’s inclusion in this alliance allows it to have access to not only United Continental Holdings Inc (NYSE:UAL)’s network, but also those of the other airlines in the Star Alliance.
Ironically, the merger that created United Continental Holdings Inc (NYSE:UAL)’s giant network is still giving the airline heartburn today. United pilots are still the only ones able to fly United aircraft, and vice versa for Continental pilots. On top of that, reservation system integration has caused customer service issues leading to poor reputations and even government fines. The issues will take time to resolve at United Continental Holdings Inc (NYSE:UAL); after all, building the world’s largest airline isn’t easy. But Air Canada shareholders can benefit from Air Canada’s use of the Star Alliance network while the largest airline in the network still seeks to integrate itself.
The fasten seatbelt light is still on
With a combination of momentum, strong earnings, and image improvement, Air Canada (TSE:AC.B) still could climb further from here. The ride may not be smooth all along the way, but Air Canada looks poised to move higher after having broken through the $3 per share level. The last time this happened, shares quickly rose to $3.40 before capacity increases and disappointing earnings halted the rally.
With capacity concerns now fully digested by the market and earnings back on track after a major beat last quarter, a rally to $3.40 and possibly even beyond would not be too surprising. I plan to hold by Air Canada shares and run a new analysis on the airline’s prospects if it hits $3.40 per share.
The article How Much Fuel Is Left In Air Canada’s Rally? originally appeared on Fool.com and is written by Alexander MacLennan.
Alexander MacLennan owns shares of Air Canada, AMR, Delta Air Lines, and Gol Linhas. He is also long the following options: $22 January 2015 Delta calls, $25 January 2015 Delta calls, $30 January 2015 Delta calls, $17 January 2015 US Airways calls.The Motley Fool has no position in any of the stocks mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
