Air Canada Reduces its Loss in Q3; Shares Pop

Air Canada (AC) reported a smaller loss and higher revenue in the third quarter, as travel recovery gains speed.

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Operating revenues for Q3 2021 came in at C$2.103 billion, nearly three times higher than the operating revenues of C$757 million reported in Q3 2020.

Air Canada reported a net loss of C$640 million (C$1.79 per share) in the quarter ended September 30, compared to a loss of C$685 million (C$2.31 per share) in the prior-year quarter.

Seat capacity increased 87% compared to the same period in 2020, but is down 66% compared to 2019.

Air Canada president and CEO Michael Rousseau said, “We are encouraged by the favourable revenue and traffic trends in the third quarter, with strong increases in key passenger geographic segments, a record cargo performance and significant improvements in both Air Canada Vacations and Aeroplan.

“The combination of these factors, along with effective cost controls, resulted in net cash flow of $153 million for the quarter, materially better than expected and as compared to the third quarter of 2020.”

The Canadian airline concluded a series of financing transactions in August, allowing it to reduce its cost of borrowing, extend the maturities of its corporate debt, and raise gross proceeds of approximately C$7.1 billion. At the end of the third quarter of 2021, Air Canada had approximately C$9.5 billion in available cash on its balance sheet. (See Insiders’ Hot Stocks on TipRanks)

On November 1, Scotiabank analyst Konark Gupta kept a Buy rating on AC, and lowered its price target to C$28 from C$31. This implies 17.3% upside potential.

The rest of the Street is cautiously optimistic on AC with a Moderate Buy consensus rating based on three Buys and six Holds. The average Air Canada price target of C$27.71 implies 15.9% upside potential to current levels.