Adam Smith

The market is incredibly volatile at the moment, and you can expect AC's beta (volatility relative to the overall market) to remain high for quite some time. RBC and Loblaw's are down 3% today, for example, while AC is down 8%. On the other hand, when the market is going up, there's a good chance AC will be on the other side of that, outperforming the market by a good margin.

jerryhung

After yesterday's good recovery
CHR (okay ER IMO) $2.3's and AC $14.x , both dropped today

more layoffs at AC

"At a minimum, layoffs will reach 19,000 — half of the current payroll — and could go as high as 22,800."

"To minimize the number of layoffs, Air Canada will ask flight attendants to slash their schedules, go on leave for up to two years or resign with travel privileges, according to an internal bulletin to members from the Canadian Union of Public Employees sent out Thursday night and obtained by The Canadian Press."

https://www.cbc.ca/news/business/air-canada-layoffs-1.5572596

EdmFlyBoi

Very much agree with this. The fundamentals of the company are strong with labour peace for many years. The next 12-18 months are going to be very challenging but AC has navigated these waters before (although with a bit of help that they will likely receive again). One could certainly argue that with the leaner fleet, labour contracts, well funded pension, and captive Canadian market, combined with the likely return of the high performing routes for which they have ample slots, that AC will return to outperforming the market (and likely many of its competitors). Not sure I would necessarily add to my position, but if I didn't have one, I would certainly consider a small one (despite Warren Buffet's dramatic exit from aviation).

tcook052

Canada’s largest airlines will burn through cash as they endure a long recovery for the industry, S&P Global Ratings said as it downgraded Air Canada and WestJet Airlines Ltd.

Air Canada won’t see revenue and capacity return to last year’s levels until 2023, S&P said in an analysis that led to a one-notch downgrade to BB-. It kept its outlook negative.

WindowSeatFlyer

Brian Madden of Goodreid gives his outlook for shares of Air Canada.
https://www.bnnbloomberg.ca/video/br...canada~1937068

Eagle2000

AC makes the majority of it's money on Trans-pacific and Atlantic flights. Until borders open up AND people do not fear flying on long flights, the stock price for AC will be grim....

Adam Smith

What's your basis for that? TATL + TPAC = 40% of AC's passenger revenues. AC doesn't disclose margins by region, but there's nothing to suggest that the margins are so much higher on those routes that they would make a majority of AC's profits.

(Other is essentially LatAm and Caribbean - South America and Sun destinations, in AC's parlance)

I don't disagree with that, as international flights (i.e. everything not domestic) are clearly a huge component, with domestic only being 30% of AC's business.

Eagle2000

I've read that in past annual reports (Yes, I read them cover to cover, accounting and special items included) of the fact that the Trans-Pacific and Atlantic are the best ones for margin and most profitable. I do not know if you recall this, one of the main reasons Air Canada took over Canadian Airlines wayyyyyyy back was because they had a stronghold on the asia pacific routes and airport slots which were the most profitable.

canadiancow

https://ca.finance.yahoo.com/news/un...115429874.html

"United Airlines Suggests Air Canada (TSX:AC) Stock Will Go to $0"

jazzsax

United suggested nothing of that. Motley fool did. Gotta love misleading headlines.

canadiancow

I think it's poorly worded, but not intentionally misleading. I didn't read it the way you did. More like "UA financial situation suggests AC stock may hit $0", which is exactly what the article describes.

mapleg

Yeah and a few days before Motley was saying that if you want to be a "millionaire" buy AC stock.

That's their stock in trade. Sky falling one day, stairway to heaven the next.

tracon

Fine print.........offer only available to billionaires.

Adam Smith

Highest margin doesn't mean the most profits in absolute dollars (your "majority of profits"). TPAC has become much more competitive in recent years (rise of the Chinese airlines, BR, etc) than it was during the time you're thinking of (around the turn of the millenium). Meanwhile, domestic has settled in to a very cozy duopoly with very high fares. That's very different from the 90s and early 2000s when AC and CP were constantly challenged by WS, Jetsgo, Greyhound, etc... We also constantly see AC blowing Y seats out the door for barely the cost of fuel on TATL/TPAC routes.

TATL and TPAC may still be the highest-margin routes, but I'm not convinced that the margins are that much higher than domestic/TB that those 40% of sales make up >50% of the profits.

Transpacificflyer

I don't think AC will have to worry about "competition" from the mainland carriers going forward. Rather, I expect that we will see AC pulling back from the PRC as the mainland carriers see their access on many routes curtailed. The reasons are obvious and air routes are low hanging fruit at this point. The new initiative of the 5 eyes to counter the PRC's policies will impact air travel and AC's investment in the PRC .Canada is the only one of the 5 eyes to not yet block Huawei in the 5G network, but once the announcement is made, we can expect some retaliation, and again AC is an easy target. Perhaps what AC will lose in respect to market access, it will gain by not having the cheap seat carriers driving airfares down. It will be interesting to see if AC declares the concern and reserves against it.