North American railcar freight volumes continue to decline, and Canadian National Railway’s (TSX: CNR, NYSE: CNI) experience is no exception. However, the rate of decline is moderating, which some industry observers see as a positive sign.

So far in the third quarter, Canadian National’s total volumes are down 5% compared to a year ago. Revenue ton miles, which measure the weight of freight shipped and the distance shipped, are off by 4%.

Most categories are still registering volume declines, with the merchandise category down 5%, while the bulk category has dropped 11%. Grain and automotive are the only bright spots in an otherwise miserable operating environment.

The graph indicates the extent to which Canadian National’s share price is correlated with rail-freight volumes. Interestingly, the stock mostly moved sideways over the past 18 months, even as freight volumes continued to decline.

The market could be expecting volumes to recover in 2017-18–similar to what happened in 2009-10. Such a rebound could well happen, given reports of large grain crops in both the U.S. and Canada and some improvement in coal volumes.

Canadian National is a top operator that has considerable pricing power. To its credit, the company took action to reduce operating costs in the early stages of the downturn. However, the volume declines are considerable, and we would not be surprised to see rather poor third-quarter results.

The stock currently yields 1.7%, and we estimate its fair value at C$82, or US$62.

WestJet Airlines Ltd. (TSX: WJA, OTC: WJAVF) announced a strong load factor for August and also carried a record number of passengers during the month.

The 86.5% load factor achieved in August was considerably better than the same month last year, despite an 8.8% increase in capacity. The airline carried a record 2.1 million passengers during the month, 5.3% more than a year ago. Revenue passenger miles (traffic) also increased by 11.3% during the month.

The third quarter is developing nicely for WestJet, with load factors and passenger numbers well ahead of last year. Although costs and margins will also impact the company’s profitability, third-quarter results, which are scheduled for release on Nov. 1, could show the first positive year-over-year growth for the 2016 financial year.

WestJet trades at an attractive valuation, with a 12-month forward EV/EBITDA (enterprise value to earnings before interest, taxation, depreciation and amortization) ratio of 3.1 times and a price-to-earnings ratio of 9.2 times. The stock currently yields 2.7%, and we estimate its fair value at C$26, or US$20.