The Motley Fool Canada »Investir» 1 000 $ investis dans les actions d'Air Canada (TSX: AC) au début de 2020 seraient autant maintenant!Le marché financier canadien a été très volatil cette année. La vente massive provoquée par une pandémie en mars a été l'une des pires dont je me souvienne. Ce qui est encore plus surprenant, c'est la forte reprise de la reprise. L'indice de référence a récupéré la quasi-totalité de ses pertes et est en baisse d'environ 9% depuis le début de l'année. De plus, la plupart des actions cotées à la TSX sont revenues en force.
However, there are still a few top TSX titles that continue to struggle and have lost a significant portion of their value. Air Canada (TSX: AC) is one of them. The once high-flying stock turned out to be a bad investment this year. The pandemic blocked Air Canada’s operations, while the company burned money, which led to a massive drop in its share price.
While its planes were immobilized, Air Canada reported a net loss of more than $ 1.05 billion in the first quarter. Meanwhile, its net cash consumption was $ 688 million in March. In addition, its losses could continue to increase during the second and third quarters.
Investors should note that Air Canada’s shares have fallen 66.6% since the start of the year, which means that if you had invested $ 1,000 in its shares in early 2020, it would cost $ 333 now. Comparatively, another stock of Canadian airlines, Cargojet, is up more than 60% this year.
The struggle continues
While the reopening of the economy and the resumption of flights provide hope, it is difficult to recover traffic. COVID-19 cases continue to increase, and we are not close to receiving a vaccine anytime soon, which is not a good sign for the airlines.
Demand for leisure and business travel could remain weak, dashing hopes of recovery in the short and medium term. The prolonged travel restrictions imposed by countries around the world could seriously harm Air Canada, as the company generates a significant portion of its revenues from its international operations.
I stressed that international traffic is unlikely to return anytime soon, as people could continue to avoid traveling abroad for their safety. Meanwhile, conducting operations with limited capacity could increase Air Canada’s losses.
Citing a slower than expected recovery, Fitch lowered Air Canada’s ratings, which strengthens my bearish position.
Cost reduction measures have been announced to stay afloat
Air Canada announced several cost-cutting measures to reduce consumption of cash and stay afloat despite the challenges. He announced company-wide cost containment and deferral programs that are expected to save $ 1.1 billion. It has laid off more than 50% of its staff.
In addition, the company suspended services on its 30 national regional routes indefinitely to reduce the rate of liquidity consumption in a context of weak demand.
Even with cost reduction measures in place, Air Canada may continue to struggle on the cash flow front. Reduced traffic, continued cash consumption and high debt could weigh on its business and, in turn, on its inventory.
Air Canada expects the airline industry to take at least three years to reach pre-pandemic levels, which means that Air Canada’s inventory recovery may take time.
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The crazy contributor Sneha Nahata has no position on any of the titles mentioned. The Motley Fool owns shares and recommends CARGOJET INC.