Scotiabank analysts have cut their price target on Air Canada’s stock, citing the impact of the COVID-19 Omicron variant on travel as well as the rising cost of jet fuel.

Scotia’s analyst team of Konark Gupta and Amina Djirdeh reduced their target on Canada’s largest airline to $29 from $31. They continued to rate the shares as a “sector outperform."

In a report, the Scotia analysts noted despite Air Canada’s recent third-quarter that showed a turnaround in the airline’s profitability and cash flow, the analysts’ “already low conviction” that the positive trends would continue this winter have weakened further.

Scotia noted that traveller demand was progressing well until November – but the outbreak of the Omicron variant and colder weather conditions impacted revenue in December. As a result, Scotia sees the airline’s key load factor metric declining in the fourth-quarter compared to the previous quarter. As well, Scotia expects Air Canada’s fourth-quarter jet fuel costs to be higher than both the previous quarter and same period a year earlier.

Looking ahead, Scotia’s analysts remain positive on Air Canada with the expectation that with Omicron fears likely peaked and the anticipated lifting of travel restrictions, air travel demand should recover later this year.

Air Canada plans to release its fourth-quarter results on Friday.