Air Canada (TSX:AC) stock may bounce back in July: Here’s why

Summary

  • Air Canada will release the earnings report for the second quarter on July 23, 2021.
  • As flights are resuming, Air Canada stock might gain investors’ attention in the next few months.
  • Air Canada stock has returned 10.5 per cent to the shareholders year-to-date (YTD).

As Canada slowly lifts COVID-19 public health restrictions, investors might be keeping a strict watch on Air Canada (TSX:AC) stock. The national carrier is expected to see an uptick in volumes over the next few days. The Canadian government is working to reduce travel restrictions, and this can give a boost to the airlines' industry, which is one of the worst affected sectors due to the pandemic.

Air Canada stock is an intriguing watch since it is the main passenger carrier in the country and has always been an investors’ favourite. If Canadian travel booms amid increasing vaccinations and flights start operating like the pre-pandemic period, this stock has the potential to beat the pre-pandemic highs.

The airline also landed the relief package from the federal government, allowing it to use a near C$5.9 billion fund facility. The Canadian government is also picking up 6 per cent equity stake in the airline and purchasing its Boeing and Airbus carriers.

Can Air Canada stock bounce back?


The AC stock dipped 0.87 per cent on Thursday, July 15, and closed at C$ 24.98 apiece. In the past month, AC share prices have declined by 11 per cent, however, this doesn't mean that investors are losing their faith in Air Canada. In the last ten days, the daily average trading volume of AC shares was approximately 2.5 million shares.

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Last year wasn’t so good for the national carrier. But this year Air Canada is actively trying to recover the losses. On July 6, 2021, the airlines announced that they will resume flights on 17 routes and 11 destinations across the world. Apart from increasing the number of domestic flights, Air Canada is also planning to start a unique non-stop service from Montreal to Cairo.

Despite the crisis, Air Canada stock has returned 10.5 per cent to the shareholders year-to-date (YTD) and 38 per cent in the last twelve months. Earlier this year, the federal government offered a C$ 5.9 billion bailout package to the airlines and that has improved the cash liquidity of the airlines.

As the flights are resuming now and the travel industry is expected to recover from the pandemic losses, Air Canada's cash flow might return to the pre-pandemic levels.

Bottom Line

Air Canada stock is not for the investors who are looking for short-term gains. In the first quarter of 2021, the airlines reported that it was burning net cash of C$ 14 million per day and had an operating loss of C$ 1.049 billion.

One-year chart of stock performance, volume and moving average exponential of Air Canada (Source: Refinitiv)

Air Canada has been under a lot of pressure and the resumption of flights and expected boom in the travel industry might help the company to recover from the losses. However, it will likely take some more time to return to profitability and that is why it might be an option for long-term investors.

Next week, Air Canada is releasing the second-quarter earnings report and that might cause a surge in the AC stock prices.

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