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Summary
- Air Canada scrips (TSX:AC) gained more than 40 per cent in the last six months.
- Ease of COVID restrictions to help make a strong comeback in 2021.
- Its purchase of the country’s third-largest tour operator Air Transat to boost revenues.
Canada’s largest airline Air Canada (TSX:AC) may be looking at a silver lining in the skies finally as the dark cloud of COVID-19 fades away. The stocks looked to make a comeback after a devastating blow in the first half of 2020 when everything went into a grounding halt, with massive cost cuts and layoffs.
However, the scrips went up by more than 20 per cent in the last three months, coinciding with several key decisions to reinvigorate the flagship carrier, which included talks to acquire the country’s third-largest holiday tour operator Air Transat.
The deal was greenlighted by Transport Minister Marc Garneau about a fortnight ago.
Although the AC scrips were down by around 3 per cent at C$24.19 apiece around 9:50 am ET on Tuesday, they have seen a rebound, gaining more than 40 per cent in the last six months, which should be a huge morale-booster for the organization, given the havoc the crisis had caused.
Pic Credit: Pixabay
Challenges Remain
But the carrier still has some distance to cover before it can reach the breakeven point of its valuation in the year-ago period when it was around 34 per cent higher than the current value.
The stocks’ trade volumes also show some significant growth, with 10-day and 30-day numbers averaging 4.7 million and 4.5 million, respectively.
The airline used to serve around 50 million passengers annually in normal times, spanning various destinations across Europe, Asia, North America, and Latin America, among others.
The company had to lay off over 20,000 staff and restrict operations in drastic cost-cutting measures to keep it afloat during COVID.
Revenues declined by 70 per cent to C$5.8 billion in 2020, the company said in its annual report. The operating loss was C$3.7 billion compared to C$1.6 billion in operating income in the previous year. Its total revenues in 2019 were C$19 billion.
But there’s a Silver Lining
But the prospects of a strong comeback this year looked better as the disruptions gradually cease with more COVID vaccines being rolled out, and restrictions are being lifted.
Also, its recent acquisition of Air Transat and the tie-up between TripActions and UATP Network that allows ease of payment for travel and hotels are expected to boost its revenues.
