Air Canada Posts C$1.3B 1Q Loss On Lower Traffic

Air Canada (AC) reported a wider loss in 1Q despite obtaining a government aid package of C$5.9 billion. The Montreal-based airline has been deeply impacted by new COVID-19 restrictions that limited travel.

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Air Canada’s revenue for 1Q 2021 came in at C$729 million, a decrease of 80% from the revenue of C$3.7 billion reported in 1Q 2020.

Meanwhile, Air Canada reported a loss of C$1.3 billion (C$3.90 per share) in the first three months of 2021, compared to a loss of C$1 billion (C$4.00 per share) in 1Q 2020, when it had fewer shares outstanding. That’s the airline’s fifth consecutive quarterly loss.

Air Canada’s President and CEO Michael Rousseau said, “We continue to pursue other revenue opportunities. Air Canada Cargo has now completed more than 7,500 all-cargo flights since March of last year. We are building our transformed Aeroplan program, establishing a well-received partnership with Starbucks in Canada. We also maintained our focus on customers and employees, becoming the first carrier in Canada to be awarded APEX’s Diamond Status for our COVID-19 Air Canada CleanCare+ biosafety program and we were named one of Montreal’s Top Employers for the eighth time and one of Canada’s Best Diversity Employers for the sixth consecutive year.”

The airline’s capacity, measured in available seat miles, was down 82.1% from a year ago, while traffic was down 89.5% when measured by revenue passenger miles.

The airline plans to roughly double its capacity in the second quarter compared to the same quarter in 2020. However, compared to the same period in 2019, second-quarter capacity is expected to be down 84%. (See Air Canada stock analysis on TipRanks)

Last week, Canaccord Genuity analyst Matthew Lee downgraded the stock to Hold from Buy and lowered its price target to C$26.00 from C$28.00, for a 7.6% upside potential. Lee appreciates Air Canada’s long-term story but cites valuation as his reason for the downgrade.

The rest of the Street is cautiously optimistic on AC with a Moderate Buy consensus rating based on 6 Buys and 4 Holds. The average analyst price target of C$29.80 implies 23.3% upside potential from current levels. Shares have risen by approximately 45% over one year.