Air Canada shares surged to their highest level since July 2021 as analysts weighed the possible sale of a stake in its Aeroplan travel loyalty program .
Bloomberg News reported Monday that Blackstone Inc. is nearing a deal for a minority interest in Aeroplan for around US$2 billion. That number implies a “significantly higher value” for the loyalty business than the market has priced in, Bank of Nova Scotia analyst Konark Gupta said in a note that upgraded the stock to a sector outperform rating.
Shares of the Quebec-based airline gained nearly five per cent to $27 as of 1:38 p.m. in Toronto on Tuesday. The company is due to report second quarter earnings after the market closes.
“Although the ongoing fuel price volatility remains a key short-term risk for us, it should be outweighed by a value unlocking catalyst such as Aeroplan monetization,” Gupta wrote, adding that Air Canada continues to trade at a discount to United States carriers .
The terms of any potential Aeroplan deal are still uncertain. But a “worst-case assumption” in which the airline sells a 49 per cent stake implies a valuation for that business of about US$4 billion, RBC Capital Markets analyst James McGarragle said in a note.
Air Canada’s market capitalization is around $7.6 billion.