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What drives Air Canada's stock price?

What drives Air Canada's stock price?

Old Jan 29, 2015, 9:08 pm
  #76  
 
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He also highlighted the importance of the Bank of Canada’s recent interest rate cut, because it came amid a declining growth outlook for the Canadian economy. Mr. Cherniavsky also pointed out that the rate cut caused the Canadian dollar to further weaken, which will lead to higher airline operating costs and lower demand for travel abroad.
From what I can see, the following demand trends are positive for Canadian carriers:

1. More Americans travelling to Canada
2. Fewer Canadians cross-border shopping for travel to US warm weather destinations
3. Lower fuel costs, net of dollar devaluation
4. Increase in US-Europe and US-Asia passengers as AC can discount more heavily in US market
5. More Canadian business travellers, especially manufacturers in Central Canada, now that currency puts them back into the game

The following expense trends are negative for Canadian carriers:

1. Higher US ground expenses
2. Higher aircraft purchase costs and lease expense (where the latter are denominated in USD which is usually the case)

The currency issue is limited to the CAD-USD relationship. The EUR/CAD is basically unchanged, and if anything, Europeans who might have looked to the US for a vacation may opt for Canada instead because Canada is a better deal of land costs.

Canada-Asia and Canada-Europe cargo rates will also be lower than US rates, which should mean a larger flow of US origin/destination freight trucked between YYZ/YUL. International freight forwarders always arbitrage by gateway, meaning they will lower their overall costs between continents by sending traffic to lower cost gateways.

Mind you, I expect AC's Q4 to be chock full of non-cash write-offs. AC will write off the on-going currency devaluation to the greatest extent possible - as required by GAPP rules. Non-GAPP, I expect, will be profitable.
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Old Jan 29, 2015, 9:21 pm
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The weak dollar/weak fuel price environment really didn't 'save' AC in the 1990s. Selling the J cabins to Nortel and other tech sector employees travelling on the company dime did though. But I think we saw what happened to AC once that dried up.

So why would it be any different this time? Especially when there isn't a prominent big-spending company out there, and a decidedly negative consumer environment?

Every source I can conjure up indicates that bookings are weaker than they've been in a long time, both domestically and international. The oilsands construction traffic is falling off a cliff. Fare wars are on the verge of unfolding, and this time around, AC enters the game in weakness, not strength, relative to their domestic competitor.

Agree on the charges showing up sooner or later. CN reported a hit on their recent earnings on account of a change to the pension discount rate they were allowed to use on the DB plans. AC probably will be hit with the same.

Last edited by pitz; Jan 29, 2015 at 9:27 pm
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Old Jan 29, 2015, 9:43 pm
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Its going to be very interesting to watch, although I'm not convinced on one or two points:

1. US traffic to Canada will probably increase, but I doubt there will be a significant increase in US-> CAN air traffic. I expect most of the gains to be in the form of tourists driving into Canada from border states, and not people from distant states flying up.

2. In theory fewer Canadians will go cross-border shopping, although that may well be symptomatic of fewer Canadians travelling south. Furthermore, oil prices are down, so there is room for US LCCs/ULCCs to protect their market shares by providing competitive prices. I suppose the same applies to TATL and TPAC - all of the carriers on the route have room to cut fares in response to aggressive pricing.

3. Most Canadians don't know the EU/CAD conversion. They're being fed a steady diet of the CAD devaluing against the USD. Going to be interesting to see if they do their homework or just read the headlines and assume the CAD is devaluing against all major currencies. Also going to be curious to see if we see an uptick in EU -> CAN traffic for the same reason.

4. Has manufacturing recovered yet? Has any sector recovered yet? I know it should recover, but the general consensus seems to be that the economy is heading in a rough direction.
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Old Jan 29, 2015, 9:52 pm
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Originally Posted by pitz
So why would it be any different this time? Especially when there isn't a prominent big-spending company out there, and a decidedly negative consumer environment?
Agree.
I've long thought the AC/Rouge shine will start to dull come Fall 2015. Think they've been too bullish capacity wise.
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Old May 5, 2015, 1:21 pm
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http://seekingalpha.com/article/3142...ossibly-triple

Air Canada: Significantly Undervalued With Catalysts To Double, Possibly Triple
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Old May 5, 2015, 1:26 pm
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Wirelessly posted (Mozilla/5.0 (BlackBerry; U; BlackBerry 9780; en-US) AppleWebKit/534.8+ (KHTML, like Gecko) Version/6.0.0.666 Mobile Safari/534.8+)

And here I thought CR and co. were driving the stock price into the ground, down ~10% in the last week.
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Old May 5, 2015, 11:19 pm
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Originally Posted by KenHamer
Wirelessly posted (Mozilla/5.0 (BlackBerry; U; BlackBerry 9780; en-US) AppleWebKit/534.8+ (KHTML, like Gecko) Version/6.0.0.666 Mobile Safari/534.8+)

And here I thought CR and co. were driving the stock price into the ground, down ~10% in the last week.
Don't worry, it's as relevant as this link is.
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Old Jul 9, 2015, 2:52 pm
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http://www.dakotafinancialnews.com/a...tal-ac/247699/

Air Canada Given New C$18.00 Price Target at RBC Capital (AC)
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Old Jul 16, 2015, 8:05 am
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Originally Posted by tcook052
http://www.dakotafinancialnews.com/a...tal-ac/247699/
Air Canada Given New C$18.00 Price Target at RBC Capital (AC)
They're the experts, but that target price is in dream world IMHO.
I'm going to short it if it gets to $14. I don't see a crash but think there are signs things are slowly turning ... Will be an interesting F/W season I think.
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Old Jul 16, 2015, 9:01 am
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Originally Posted by CloudsBelow
They're the experts, but that target price is in dream world IMHO.
I'm going to short it if it gets to $14. I don't see a crash but think there are signs things are slowly turning ... Will be an interesting F/W season I think.
perhaps its time AC spins Rouge off into its own company, with its own listing.
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Old Jul 16, 2015, 10:57 am
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I was talking to another FTer last night about AC stock price.

I kept on thinking that it's a smart investment. You can literally see the future* (minus anything unpredictable like an airline incident). You see it with Altitude, the decreasing pitch, the increasing density, the more efficient airplanes, I see it as a crystal ball that AC stock price will go up.

The FTer reminded me about the 1% profit margin, and I quickly felt deflated.

But if you think about it, AC is doing a lot right lately (from a profit point of view).
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Old Jul 16, 2015, 3:34 pm
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Originally Posted by superangrypenguin
I was talking to another FTer last night about AC stock price.

I kept on thinking that it's a smart investment. You can literally see the future* (minus anything unpredictable like an airline incident). You see it with Altitude, the decreasing pitch, the increasing density, the more efficient airplanes, I see it as a crystal ball that AC stock price will go up.

The FTer reminded me about the 1% profit margin, and I quickly felt deflated.

But if you think about it, AC is doing a lot right lately (from a profit point of view).
The stock market is forward looking my friend. That has already been priced into the stock.
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Old Jul 17, 2015, 9:11 pm
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Originally Posted by CanRulez
The stock market is forward looking my friend. That has already been priced into the stock.
Lets not play that game
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Old Jul 18, 2015, 7:42 pm
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AC won't be paying over $300 million a year for the next year or two into the pension plan, so that's pure profit on the bottom line. And its previous two quarters averaged had profits well in excess of 1% of revenues. However, it's a bit late to get into this stock...two years ago when it was trading at around $2 was when you should have bought.
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Old Nov 4, 2015, 9:23 am
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Air Canada Stock.

This was brought up in another thread.

https://www.aircanada.com/en/about/m...r_day_2015.pdf

Is it time to buy AC stock? I'm seriously thinking about it at this point. The airline is doing well, it's improving in many different ways, and I think i'm about ready to pull the trigger, being fully aware that the price of the stock today has these factors already...well, factored in.

Thoughts?
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