Air Canada (TSX:AC), WestJet & Other Airlines Find Hope In Government Bailout Plan

Summary

• The Canadian government has said it will be “exploring all possible options” to support airlines drowning in pandemic-related troubles.
• Reports indicate that the government is mulling a bailout package release for the industry.
• Air Canada recently got involved in a Twitter feud with rival WestJet over refund offers.
• The Air Canada-Transat deal is expected to see the light of day in the first quarter of fiscal year 2021.

As the Canadian aviation sector continues to struggle with pandemic-triggered challenges, the government is stepping in to help. Industry Minister Navdeep Bains said on Thursday, October 22, that the federal government will be “exploring all possible options” to support them. Canadian airlines have been reeling under the impact of the lockdown restrictions and federal aid for some time now. Air carriers such as Air Canada (TSX: AC), WestJet (TSX: ONEX) and Transat AT Inc (TSX: TRZ) have been struggling, with reports of pay cuts and asset sales coming up often. On the other hand, though, freight carrier Cargojet (TSX: CJT) has been making the most of the pandemic, with its shares continuing to rally.

Prime Minister Justin Trudeau-led federal government is mulling a bailout package release for the nation’s struggling airline industry as early as November, say media reports. The package may include loans at low interests, withdrawal of airport fees, etc.

Air Canada (TSX:AC)

Current Stock Price: C$ 16.77

Reduction of employee salaries and refund updates continue to keep Air Canada on the news. The largest Canadian airline even got involved in a Twitter feud with rival WestJet on Wednesday, October 21, when the latter claimed to be the first national carrier that chose to give refunds to original forms of payment. Air Canada lashed called the WestJet statement “misleading” and said it has already refunded more than C$ 1.2 billion to eligible customers.

Air Canada also recently put its all-business class Jetz aircraft on the holiday routes between Canada and popular winter destinations.

Down over 68 per cent down this year, Air Canada stocks continue to sail way beneath their pre-pandemic levels. Since sinking to a low of C$ 12.15 (March 19) in March, Air Canada shares registered a decline of 12 per cent in the last six months.

Currently trending on the TSX for its heavy trading activities, Air Canada stocks record an average trading volume of 3.8 million in the last 10 days.

The pandemic’s impact on the top Canadian carrier reflected in its second quarter financial results, which posted a substantial 89 per cent YoY decline in its total revenues of C$ 527 million. Air Canada’s total count of passengers carried for Q2 2020 was down 96 per cent YoY.

Air Canada is set to present its third quarter results on November 9, 2020.

Onex Corporation (WestJet Stock/ TSX: ONEX)

Current Stock Price: C$ 58.57

WestJet Airlines' recent kerfuffle with Air Canada came on the heels of its new policy in which it is offering refunds for customers if the airline cancelled their flight. WestJet added that it would be able to provide refunds “proactively” going forward, in the light of its recent pay cuts and fleet parking.

Shares of Onex Corporation, which currently owns WestJet Airlines, are down 29 per cent year-to-date (YTD). The stocks sank nearly six per cent in the last six months.

Onex Corporation’s total net earnings stood at US$ 629 million in the second quarter ending 30 June 2020. Its segment net earnings of C$ 689 million included net earnings of US$ 657 million from the investing segment and about US$ 32 million from the wealth and asset management segment.

Onex Corporation will be announcing its third quarter results on November 13, 2020.

Cargojet Inc (TSX: CJT)

Current Stock Price: C$ 226.15

Cargojet Inc made the best of the worst times amid the coronavirus pandemic. Riding on the increasing demand of online deliveries and absence of regular passenger flights, Cargojet’s business soared in the last seven months, and so did its shares.

Earlier in October, Cargojet President and CEO Ajay K Virmani was named the Strategist of the Year and one of Canada's top leaders of 2020 by the Globe and Mail's Report on Business.

Shares of Cargojet registered a growth of over 115 per cent this year. Its scrips steadily climbed over 83 per cent in the last six months. Cargojet stocks are currently ranked high on the TSX,

The top Canadian freight carrier secured a 65 per cent YoY growth in its total revenue of C$ 196 million in the second quarter ending 30 June 2020. Its gross margin was up 241 per cent YoY.

The company also pays a quarterly dividend of C$ 0.234, which currently yields 0.414 per cent, as per the data on the TMX Group.

Cargojet will be announcing its third quarter results on November 3.