It’s gloomy days for the airline and travel industries both worldwide and here at home, where worries about the future of Air Canada (Air Canada Stock Quote, Chart, News TSX:AC) are top of mind.
Stephen Takacsy of Lester Asset Management says while AC may bounce back when travellers return to the skies the company’s better days are likely behind it.
“This is really, really tough —the current situation on the airline business and the hotel business and so on. I’m skeptical that the airline industry will ever fully recover to its former glory days,” said Takacsy, president and CEO at Lester, who spoke on BNN Bloomberg on Tuesday.
The COVID-19 pandemic has decimated companies like Air Canada which saw passenger travel down by 96 per cent over its last quarter, resulting in a revenue chop of 90 per cent as the company reported an operating loss of $1.55 billion and is reportedly leaking money at a rate of $19 million per day.
The result has been a big drop in AC’s share price, which had been cruising along at the beginning of 2020, showcasing the company’s renewed fiscal strength after a multi-year turnaround.
Back in the early 2010’s, Air Canada’s future was in doubt as the company was weighted down by debt and feeling the pressure of competition. But a return to profitability coupled with shrewd expansion moves over the past half-decade resulted in a much more sound, well-managed business, which eventually brought investors back to the name.
This time around, however, there’s seemingly little that management can do with larger forces at play as the world waits for a potential vaccine for COVID-19.
Takacsy says the Canadian government may have to step in with further aid to the airlines.
“It’s very challenging out there. [Air Canada] is not the type of thing we would invest in because like I said I don't think it’s going to recover fully to where it was before. I do think the government has to look hard at the industry and see if there are things that can be done to encourage people to travel again,” Takacsy said. “[But] until there’s a vaccine found I think it’s gonna be very hard for the business to recover.”
This month, Air Canada offered a new promotion aimed at getting Canadians in the air, domestically, at least, with its new Infinite Canada Flight Pass. The plan gives users unlimited travel within Canada for three months, starting at $2,260.
“Air Canada recognizes that as air travel begins to return to normal customers want flexibility and certainty. Our new Infinite Canada Flight Pass provides both by enabling customers to easily book and change their travel plans without any blackout restrictions or change or cancellation fees, while locking in the price of their flights for up to three months with one flat fee,” said Air Canada in a press release.
The Infinite Canada Flight Pass was on offer from September 16 and to September 23.
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