Air Canada Stock: The Underperformance Is Likely Past

air canada stock: the underperformance is likely past

Aircraft wing plane

Air Canada (TSX:AC) stock has been one of the worst-performing TSX equities over the last three years. In a period that has seen Canadian stocks as a whole climb 27%, AC stock has fallen 28%—definitely not an impressive showing.

With that said, the factors that led to Air Canada underperforming are mostly in the past. The stock crashed because, in March 2020, Canada entered a massive nationwide lockdown that required most international flights to cease. Domestic travel was still allowed, but with most provinces requiring a 14-day quarantine upon arrival, it was highly disincentivized. As a result, Air Canada’s revenue declined 81%, and it lost $4.6 billion. 2020 was a tough year for Air Canada, but now, with COVID lockdowns a thing of the past, the company’s main headwind has abated. As a result, its stock is probably safe to buy today.

COVID-19 lockdowns are over

COVID-19 lockdowns have been out of the picture in Canada for at least a year and a half now. The last big lockdowns were seen in Ontario in the winter of 2021. Since then, there have been very few lockdowns, and basically no truly large ones (e.g., lockdowns affecting entire provinces). That doesn’t mean there could never be another COVID “wave” that brings lockdowns back, but the absence of lockdowns has been a reality for almost two years. Recent history would suggest that lockdowns probably aren’t coming back, at least not soon.

This fact is a good thing for Air Canada. One of the most common features seen in COVID lockdowns was 14-day quarantines for travellers. If you entered a province after leaving another province, you had to socially isolate for 14 days. Only after completing the social isolation could you go outside. This heavily disincentivized most “leisure” and business travel because such trips usually last fewer than 14 days. Travelling and quarantining for 14 days didn’t seem “worth it” back in 2020, unless you were literally moving to another province. Today, this restriction is lifted nationwide, so Canadians are back to travelling like in the pre-COVID days. This is a positive for Air Canada, which saw its revenue jump 71% in the fourth quarter of 2022.

Air Canada’s financials are improving

Another thing Air Canada has going for it is the fact that its financials are improving. In 2020 and 2021, Air Canada lost billions of dollars. In 2023’s second quarter, it was profitable, as can be seen in the metrics below:

  • $5.42 billion in revenues, up 36%
  • $802 million in operating income, up 14.8%
  • $1.4 billion in operating cash flows
  • $950 million in free cash flow
  • $838 million in net income, up from a loss

Overall, it was a pretty good quarter. The company was undeniably profitable, and its growth was strong, too.

One risk to keep in mind

Although Air Canada has mostly overcome the “COVID lockdown” risk factor, it is now facing another risk factor: rising fuel costs.

The price of oil has been rising this year, and with high oil prices come high jet fuel prices. Jet fuel is the average airline’s biggest cost, so investors will want to monitor the situation with oil prices going forward. If prices go much higher, Air Canada’s profits will likely decline and could possibly even turn negative.

Should You Invest $1,000 In Air Canada?

Before you consider Air Canada, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2023… and Air Canada wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 26 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks

* Returns as of 8/16/23

More reading

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

News Related

OTHER NEWS

Hot rental market makes search 'stressful' for many — and it won't get better soon

Hot rental market makes search ‘stressful’ for many — and it won’t get better soon TORONTO — On the hunt for a rental home in Calgary over the last six ... Read more »

18 Days Until The Season Begins

18 Days Until The Season Begins Throughout the summer and into the fall, we’ll be counting down the days until the Edmonton Oilers begin their 2023-24 season with a daily ... Read more »

Kosovar police surround a village after Serb gunmen storm a monastery in violence that has killed 4

Kosovar police surround a village after Serb gunmen storm a monastery in violence that has killed 4 PRISTINA, Kosovo (AP) — Dozens of Serb gunmen dressed in combat uniforms killed ... Read more »

President Macron says France will end its military presence in Niger, pull its ambassador after coup

President Macron says France will end its military presence in Niger, pull its ambassador after coup PARIS (AP) — President Emmanuel Macron announced Sunday that France will end its military ... Read more »

Inter stay perfect with 1-0 win at Empoli, which is still without a point or a goal

Inter stay perfect with 1-0 win at Empoli, which is still without a point or a goal MILAN (AP) — Inter Milan’s perfect start to the Serie A season continued ... Read more »

Victor Boniface scores 2 as Bayer Leverkusen beats Heidenheim 4-1 in the Bundesliga

Victor Boniface scores 2 as Bayer Leverkusen beats Heidenheim 4-1 in the Bundesliga LEVERKUSEN, Germany (AP) — Victor Boniface scored twice as Bayer Leverkusen kept up its strong start to ... Read more »

Astros OF dealing with soreness in surgically-repaired shoulder

Houston Astros designated hitter Michael Brantley. The Astros have been without outfielder Michael Brantley for most of the past week due to soreness, which according to manager Dusty Baker (as ... Read more »

Angels' Tyler Anderson to finish season on IL with knee soreness

Angels’ Tyler Anderson to finish season on IL with knee soreness MINNEAPOLIS (AP) — Los Angeles Angels left-hander Tyler Anderson will not start as scheduled on Sunday and will be ... Read more »

Jackson Rutledge earns first career victory as Nationals defeat Braves 3-2 in DH opener

Jackson Rutledge earns first career victory as Nationals defeat Braves 3-2 in DH opener WASHINGTON (AP) — Jackson Rutledge earned his first major league victory while combining with three relievers ... Read more »

Raiders vs. Steelers prediction, odds, spread, line: Sunday Night Football picks from model on 164-117 roll

Sep 9, 2018; Denver, CO, USA; Denver Broncos mascot performs to the crowd in the fourth quarter against the Seattle Seahawks at Broncos Stadium at Mile High. The Pittsburgh Steelers ... Read more »

Diamondbacks' Ketel Marte scratched vs. Yankees because of illness

NEW YORK (AP) — Arizona Diamondbacks second baseman Ketel Marte was scratched from Sunday’s game against the New York Yankees because of an illness. Marte was in Arizona’s original lineup ... Read more »

Max Webster, Platinum Blonde among Canada's Walk of Fame inductees

Kim Mitchell’s pre-solo Toronto band Max Webster is among the 13 Canada’s Walk of Fame inductees that will be collectively honoured on Thursday night at Massey Hall Kim Mitchell says ... Read more »

Israeli airstrikes hit Gaza for the 3rd day in a row as West Bank violence intensifies

Israeli airstrikes hit Gaza for the 3rd day in a row as West Bank violence intensifies NOUR SHAMS REFUGEE CAMP, West Bank (AP) — Israeli airstrikes struck militant sites in ... Read more »

Saint John Sea Dogs’ Pat Leaver Steals a Point at Home Opener

Saint John Sea Dogs’ Pat Leaver Steals a Point at Home Opener There is a special atmosphere that revolves around the home opener of a small-town team in the Quebec ... Read more »

Britain's Ainslie wins SailGP regatta. Team USA finishes third a day after a crewman was injured

Britain’s Ainslie wins SailGP regatta. Team USA finishes third a day after a crewman was injured Sir Ben Ainslie and Emirates Great Britain earned their second straight SailGP regatta win ... Read more »

FAA Wants To Adjust Schedules at Newark Airport

United Airlines airplane at Newark Airport. The Federal Aviation Administration wants to better align the hourly schedules of its employees at Newark Liberty International Airport in light of the additional ... Read more »

Canadiens Pearson Finds Chemistry On Top Line, Mesar Shines

Canadiens Pearson Finds Chemistry On Top Line, Mesar Shines The Montreal Canadiens played their annual Red and White intrasquad scrimmage at the Bell Centre on Sunday afternoon, the final scrimmage ... Read more »

Unease grows in Punjab as Canada-India tensions deepen

Steps from the old quarter of Amritsar, the holiest city for the Sikh community, 62-year- old Ashok Kumar tended his newspaper stand, with the dailies perched precariously on the seat ... Read more »

Drew Barrymore Explains Decision To Resume Talk Show Amid Strikes, Planned Picketing: ‘I Own This Choice’

Drew Barrymore Last week, it was announced that “The Drew Barrymore Show” was resuming production, with the fourth season kicking off in mid-September. When the WGA initiated strike action back ... Read more »

Jakobi Meyers injury update: Raiders WR leaves game after taking scary hit vs. Broncos

Jakobi Meyers injury update: Raiders WR leaves game after taking scary hit vs. Broncos The Raiders were able to beat the Broncos 17-16 on Sunday, but they suffered a key ... Read more »

‘Next Goal Wins’ Review: Taika Waititi’s Soccer Film Sacrifices Sincerity for Self-Conscious Humor

‘Next Goal Wins’ Review: Taika Waititi’s Soccer Film Sacrifices Sincerity for Self-Conscious Humor Before the world premiere of his latest film, Next Goal Wins, Taika Waititi offered a few introductory ... Read more »

Intelligence chief gives Russia no more than a year: ‘Down’ and ‘panicking’

Russia will not last another year in the ongoing Ukraine war. Ukrainian Lieutenant General and head of the Military Security Service Kyrylo Budanov is convinced of this at the “Yalta ... Read more »

Rubiales resigns as Spain's soccer president 3 weeks after kissing player at Women's World Cup final

Rubiales resigns as Spain’s soccer president 3 weeks after kissing player at Women’s World Cup final BARCELONA, Spain (AP) — Luis Rubiales, the suspended head of the Spanish soccer federation, ... Read more »

Islanders’ Line Options for Oliver Wahlstrom

Islanders’ Line Options for Oliver Wahlstrom The NHL season is around the corner with opening night a month away. Recently, the New York Islanders writers at The Hockey Writers (THW) ... Read more »

Zach Bryan Spends Second Week Atop Billboard 200 With Self-Titled Album

Zach Bryan Spends Second Week Atop Billboard 200 With Self-Titled Album Zach Bryan’s self-titled album spends a second week atop Billboard 200 chart (dated Sept. 16), as the set earned 115,000 ... Read more »

Toronto: “Hotline Bling” Director X Calls for Training Black Talent to Break Down Barriers to Racial Justice

Toronto: “Hotline Bling” Director X Calls for Training Black Talent to Break Down Barriers to Racial Justice New Canadian Black talent faces many obstacles to making real inroads on film and TV ... Read more »

Braves become 1st MLB team to clinch playoff spot as Acuña and Olson lead rally past Pirates

Braves become 1st MLB team to clinch playoff spot as Acuña and Olson lead rally past Pirates ATLANTA (AP) — The Atlanta Braves became the first team to clinch a ... Read more »

TIFF Tribute Awards: Spike Lee, Pedro Almodovar, Colman Domingo Provide Star Power Despite Strikes

TIFF Tribute Awards: Spike Lee, Pedro Almodovar, Colman Domingo Provide Star Power Despite Strikes Despite the first simultaneous strikes of actors and writers since 1960 — 16 years before the first ... Read more »

Halton Healthcare Takes Innovative Step to Combat Opioid Crisis

In a groundbreaking initiative, Halton Healthcare, encompassing Oakville Trafalgar Memorial Hospital, Milton District Hospital, and Georgetown Hospital, has emerged as one of the foremost community hospital organizations to offer free ... Read more »

Trudeau's plane grounded in India by technical issues after G20 summit conclusion

NEW DELHI — Prime Minister Justin Trudeau’s return to Canada from the G20 summit in India has been delayed by problems with his plane. The Prime Minister’s Office says it ... Read more »
Kênh kiến thức kỹ năng, phát triển bản thân, hướng nghiệp, blog nhân sự