Air Canada Posts a Smaller Loss in Q2 on Higher Travel Demand

Air Canada (AC) reported a smaller loss and higher revenue in the second quarter. Easing travel restrictions and rising vaccination rates have helped the Montreal-based airline recover from the pandemic crisis.

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Operating revenues for Q2 2021 came in at C$837 million, increasing 58.8% from C$527 million reported in Q2 2020.

Meanwhile, Air Canada reported a net loss of C$1.17 billion (C$3.31 per share) in the quarter ended June 30, compared to a loss of C$1.75 billion (C$6.44 per share) in the prior-year quarter. On an adjusted basis, profit amounted to C$1.08 billion or C$3.03 per share.

Air Canada was expected to post an adjusted profit of C$2.76 per share and revenue of C$848.2 million, according to financial data firm Refinitiv.

The country’s largest airline increased its seating capacity by 78% from the previous year’s quarter.

Air Canada’s President and CEO Michael Rousseau said, “We are pleased to see vaccination rates increasing and more recent science-based easing of travel restrictions in Canada. The elimination of the quarantine period for fully vaccinated returning Canadians and the removal of other travel restrictions announced in June led to a significant increase in bookings. We expect this trend to further increase following the July 19th announcement communicating positive changes to come for Canadian travel restrictions. Our employees and other stakeholders should be encouraged by the positive industry trends and the strong improvement in the outlook we see for our airline. However, as we have historically done, we will continue to manage both our cost structure and the balance sheet very conservatively.”

On July 19, 2021, Air Canada announced its international summer schedule, comprising 55 routes and 34 destinations in the United States, with up to 220 daily flights between the United States and Canada. Fully vaccinated U.S. tourists will be allowed to enter the country starting August 9. (See Air Canada stock charts on TipRanks)

Earlier this week, TD Securities analyst Tim James kept a Buy rating on AC and lowered its price target to C$32.00 from C$34.00. This implies 27.7% upside potential.

The rest of the Street is cautiously optimistic on AC with a Moderate Buy consensus rating based on 4 Buys and 3 Holds. The average Air Canada price target of C$30.26 implies 20.8% upside potential to current levels.