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Aerospace companies will falter in tough economy

Sept. 27, 2011, Montreal – Canada's major transportation companies are expected to face lower revenues and profits this year as they feel the pressure from a weakened global economic outlook, an industry analyst said Tuesday.


September 27, 2011
By The Canadian Press

Sept. 27, 2011, Montreal – Canada's major transportation companies are expected
to face lower revenues and profits this year as they feel the
pressure from a weakened global economic outlook, an industry
analyst said Tuesday.

Turan Quettawala of Scotia Capital downgraded his expectations
for Air Canada's stock price (TSX:AC.B) and reduced his earnings
estimates for several rail, aerospace, airline and trucking
companies by an average of 15 per cent.

Although he has become more cautious, the analyst said he's not
assuming a 2009-like recession. Scotiabank economists have predicted
that if a recession does occur, it will likely be "shallow and
short."

Even with a more pessimistic outlook, he said Canadian National
Railway (TSX:CNR), Canadian Pacific Railway (TSX:CP) and Bombardier
(TSX:BBD.B) represent good value because their shares have already
adjusted.

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Quettawala downgraded the country's largest carrier and upgraded
its partner Chorus Aviation Inc. (TSX:CHR.B).

Other analysts downgraded Air Canada much earlier.

Walter Spracklin of RBC Capital Markets did so in January, when
the shares were double where they are currently trading and reduced
his estimates on the weak macroeconomic outlook last month.

Quettawala believes Air Canada and WestJet Airlines (TSX:WJA)
will likely face lower profits even though lower yields have been
partially offset so far by reduced costs and fuel prices.

Canada's railways are expected to face slower growth, but should
be helped by a stronger Canadian gain crop, CN's continued move to
an intermodal format, and slightly higher coal and potash volumes.
CP also faces easier comparisons to last year.

Bombardier faces challenges from lower deliveries of all aircraft
except its large Global business jets.

Earnings estimates in 2012 for trucking companies TransForce
(TSX:TFI), Mullen Group (TSX:MTL) and Contrans Group (TSX:CSS) are
expected to fall between three and 11 per cent.

All the transportation companies besides WestJet were up in
Tuesday trading. Air Canada shares gained the most, rising more than
six per cent to $1.39, followed by Bombardier, which was up 3.2 per
cent at $4.16.