Air Canada (TSX:AC) Posts C$1.3Bn Loss; Aviation Stock Still A Buy?

National carrier Air Canada (TSX:AC) reported lower than expected losses for the first quarter of 2020. Its operational capacity dropped 82 per cent in the first quarter, amounting to a C$ 1.304 billion loss or C$ 4 per common share.

The airline burnt net cash of C$ 1.274 billion, representing C$ 14 million a day on average during the first quarter, which was lower than the company’s prediction of between C$ 15 billion and C$ 17 million a day.

The company managed to generate operating revenues of C$ 729 million for the quarter, an expected massive drop of 80 per cent year-over-year (YoY) or C$ 2.993 billion YoY. 

It held a free cash flow of C$ 6.582 billion at the end of the first quarter, excluding the federal government-supported low-interest credit facilities worth C$5.9 billion.

Meanwhile, stocks of the national carrier slightly climbed by nearly 2 per cent in the opening trading hour on Friday, May 7.

Air Canada’s cargo division accelerated its operations to explore more commercial freight market during the first quarter of this year.

Let us glance at the airline’s stock movement and outlook for the second quarter:

Air Canada (TSX:AC)

The stock has plunged 20.68 per cent to 24.60 per share from its 52-week high of C$ 31 apiece (noted on March 15, 2021) due to extended restricted functions amid the ongoing second wave of COVID-19.

Once Air Canada’s flights resume operations at full-capacity post-pandemic, investors could witness a massive rebound in its share price.

The air transport stock has improved more than 92 per cent from its 52-week low of C$ 12.80 apiece (noted on May 14, 2020).

The stock has delivered approximately 8 per cent return this year and pushed its market cap to C$ 8.8 billion.

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The company also gave up on its takeover of the leisure tourism firm, Transat AT (TSX:TRZ) in the previous month.

Air Canada’s Outlook For Q2 2021

The airline foresees doubling its second-quarter flight capacity on a YoY basis, but it indicates that it is expected to be 84 per cent lower than the same quarter in 2019.

The company also expects net cash expenses in the range of C$ 1.180 billion to C$ 1.370 billion, or C$ 13 million to C$15 million a day in the current quarter.

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