Adam Smith

Large US airline stocks were up about 2% today. AC was down over 8%. Not a great day.

lespoir

The current management of AC seems incompetent…in comparison with Calin Rovinescu.

I was out this morning, dumping all my shares at a huge loss, after the last 3-4 years of foolishly and desperately wishful thinking of AC returning to the glorious days.

Jumper Jack

If you look at their fleet planning, it would almost seem they are looking at muted growth for 2025 as well (recession planning?)
Q2 might be worse given there is no fuel cost reprieve anymore..

The only upside might be massive influx of pop growth that may hold the yields.... maybe...

EdmFlyBoi

Agreed. The present CEO seems much less capable that Rovinescu who did a very respectable job of bringing AC to a place of solid financial performance. Despite an increase in revenues, AC's cost increase is really outstripping their rise in revenues which does not bode well for when the new labour agreements get negotiated.

JustSomeGuy1978

Looking deeper at the numbers:

• General revenues were UP 6.9% from Q1 23, supported by
  • Passenger revenues UP 8.7%
  • Cargo revenues DOWN 9.7%
• Expenses UP 6.3%
  • Fuel costs DOWN 8.8%
  • Wages UP 21.2%
• Operating income UP 164.7%

So what was the market expecting. Sure wages increase substantially outside the range of income growth (however I believe a new contract was signed recently which may explain that)

The other non tax large expense the company has incurred was a $46 million loss on "debt settlements" which appears to be costs related to retirement and reissuing on some revolving credit facilities. Regardless this would seem to be a one time (or rare) instance.

Remove that and the company's EBIT becomes a loss of $19 million compare to Q1 23's loss of $23 million an improvement of 17.4%

So I wonder what was the market expecting?

tracon

Did wages go up 21% or employee costs go up 21%?
Not the same thing.

There are more employees doing less to help with the operational challenges of a couple years ago.

Stranger

Which brings back some sense of reality to the discussion.

Rather than a blanket statement whereby current management is "incompetent." Uninspired, definitely, prone to put his foot in his mouth, yes. But I would argue that there is no case to be made either way on incompetence.

rankourabu

https://ca.finance.yahoo.com/news/ai...l?guccounter=1

Air Canada (AC.TO) reported a wider loss than analysts expected in the first quarter of the year, as costs climbed and pent-up demand slowed, sending the airline's shares down nine per cent on Thursday.

The Lev

There was also $20 million associated with getting out of the delivery of two cargo 767's now that the cargo market has stalled.

The latter. The MD&A also mentioned a significant part of this related to accruals for profit sharing with employees.

Wigg

As per the article in the Globe this morning 3 analysts have still raised their target price to the $30 range. This is due to the strong balance sheet (cash and low leverage) and a still positive outlook. The market is very fickle on a short term basis, reacting to any and every hiccup it hears.

JustSomeGuy1978

"Wages, salaries, and benefits"

YVR4Ever

I hope they're right! I took the opportunity to pick up some shares yesterday to get my DCA down. I suspect it will bounce back at least somewhat when summer flying season comes along and yields remain high.

lespoir

these are completely technical estimates by analysts, which are based on many assumptions in the analysis (my last ten years of career journey was all about this kind of technical analysis).

the point is that, yes, it is possible that AC may hit to $30, sometime. That my my expectations for the last two years, and it never got there. In many ways, stock market dynamics can be triggered by many things, and a major one is investor’s psychology, the confidence feeling about a company whose in may suggest the story this company is telling is convincing or not (convincing is not equal to true).

in AC’s situation, most investors seem to hold a deep doubt on AC’s performance, so it is very difficult to get over this psychological hurdle. Aviation/airlines has always been a rough sector to attract investors, so you have to be almost No. 1, in order to stand out.

AC has this major pilot contract negotiation on-going, and the pilots demand to match the similar agreement with huge pay raises, like Delta’s pilots.

Another major heavy weight that drags down Air Canada is its aircraft debt. So despite the last few quarters earnings reports, which is usually the crafted PowerPoint and nicely modeled Excel numbers, vs. consistent long term results of net earnings and debt payments. I am just afraid it would take much longer to overcome common street investors to jump in.