Is it time to keep close watch on Air Canada (AC)?

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Is it time to keep close watch on Air Canada (AC)?

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Is it time to keep close watch on Air Canada (AC)?
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Highlights

  • Air Canada (TSX: AC) made headlines as it announced to more than double its operating capacity, measured in terms of available seat miles (ASM) this year, from 2021 levels this year while hosting its Investor Day event on Wednesday morning, March 30.
  • The Montreal-based company also targets total free cash flow generation of approximately C$ 3.5 billion during 2022-2024
  • The AC stock swelled by over 16 per cent quarter-to-date (QTD).

Air Canada (TSX: AC) made headlines this week as it announced its plan to more than double its operating capacity, measured in terms of available seat miles (ASM) this year, from its 2021 levels. 

The Canadian airline has also outlined its 2022 outlook, key targets for 2022-2024 and Aeroplan membership growth to return to profitability and enhance long-term shareholders' value with the pandemic receding and travel returning. 

What are Air Canada’s (TSX: AC) plans for fiscal 2022?

The Montreal-based company said that it plans to expand its ASM capacity by 150 year-over-year (YoY) in 2022.  

The company added that it would continue to adjust its operating capacity and take necessary actions depending on market factors like passenger demand, public health and travel rules and economic factors, including inflation and cost pressures. 

The flyer also expects its adjusted costs per available seat mile (CASM) to grow approximately 13 to 15 per cent from 2019 levels. 

In addition, the company projects a yearly EBITDA margin of approximately 8 to 11 per cent for FY2022. 

What to know about Air Canada's long-term targets?

While disclosing its key targets for 2022-2024, Air Canada said that it aims at an annual EBITDA of approximately 19 per cent for 2024.  

The company is also targeting an annual return on invested capital (ROIC) of 15 per cent and a leverage ratio approaching one by the end of 2024., it said 

Air Canada also aims to reach total free cash flow generation of approximately C$ 3.5 billion during 2022-2024 and a 40 per cent rise from February 2019 levels in the Aeroplan membership base by the end of 2024. 

Also read: Why is Hycroft Mining (HYMC) stock soaring again? 

Air Canada's financial performance in Q4 FY2021

Air Canada posted operating revenue of C$ 2.73 billion and a net loss of C$ 493 million in Q4 FY2021. Its EBITDA amounted to C$ 22 million in the latest quarter. 

Air Canada (TSX: AC) Q4 2021 results 

Air Canada's stock performance 

AC stock swelled by over 16 per cent quarter-to-date (QTD) and was trading at C$ 24.50 apiece at 12:14 PM EST on Wednesday, March 30, with 1.5 million shares exchanging hands.

Bottomline

If Air Canada’s plans outlined in the latest outlook work, it could be a significant gain in the coming years. However, investors should keep an eye on market changes and COVID updates before investing anywhere as these factors could impact many businesses.

Also read: Shopify (TSX: SHOP) to invest in carbon removal solutions: Buy alert?

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