The good news is that airline company Air Canada (TSE:AC) made a new move to round out its fleet. The bad news, at least as far as investors were concerned, is that they made their play involve Boeing (NYSE:BA). The move to pick up several new Boeing planes didn’t sit well, and investors sent shares down fractionally in Wednesday morning’s trading.
The impact of the move, however, should be comparatively limited. Air Canada will be leasing eight 737-8 planes from BOC Aviation Ltd., with delivery expected by the end of this year for flights starting next year. In the meantime, some “required modifications” will be made to the aircraft, so hopefully, no bits will fall off mid-flight, as has seemed to happen way too often lately.
The 737-8s in question were picked up for several reasons, noted Air Canada’s president and CEO Michael Rousseau. Among these were a combination of fuel and cost efficiencies coupled with the fact that they were brand new, meaning they’ll likely last quite some time. Plus, they’ll offer additional capacity, which will let Air Canada take better advantage of the rising interest in travel right now.
An Issue of Timing?
Then again, maybe not. Reports suggest that Air Canada may be adding capacity at the worst possible time, thanks to a slumping interest in travel. Air Canada has recently come under fire from short sellers, who have been targeting the airline over concerns that the resurgent interest in travel may be falling apart thanks to a softening global economy.
What’s more, on a certain level, Air Canada’s strategy agrees with this assessment. It’s already cut six different U.S. airports from its upcoming winter schedule, including Cincinnati, Cleveland, Columbus, Kansas City, Hartford, and Indianapolis. However, to be fair, these are hardly winter destinations.
Is Air Canada a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on Air Canada stock based on five Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 28.45% loss in its share price over the past year, the average Air Canada price target of C$26.83 per share implies 50.32% upside potential.
