The Motley Fool

Air Canada’s (TSX:AC) Latest Move Reeks of Desperation

Image source: Getty Images.

The year 2020 just hasn’t been Air Canada (TSX:AC). After losing more than a billion dollars two quarters in a row, the company’s stock is in the gutter. Not only is the company losing money, but it’s borrowing money just to cover operating expenses.

And the situation could be getting worse. Air Canada executives have spent much of 2020 lobbying the government to ease travel restrictions. This week, the company argued that mandatory quarantines after travel should be lifted. Prior to that, it had lobbied for other measures that would help airlines financially despite being contrary to public health guidelines.

It looks like the company is getting desperate, and recently it took a step that seems to confirm that. It was a measure that shows an incredible eagerness to generate revenue by any means necessary. As you’re about to see, it’s unlikely to help with the company’s financial woes.

“Unlimited travel” pass

On September 16, Air Canada launched an unlimited travel pass. The pass lets customers fly as much as they want for a flat monthly rate. Starting at $2,000 a month, the pass isn’t even remotely affordable for the majority of Canadians. But it’s possible that the company could get some kind of revenue boost from wealthy individuals using it.

That said, the effect would probably be minimal. The mandatory self-isolation that most provinces have implemented has made travel unappealing–even for those with the financial means to shell out $2,000 a month. If you travel and get caught violating self-isolation orders, you could face legal consequences. So Air Canada is up against some big obstacles here.

Refund issues abound

Another sign that Air Canada is getting desperate is the fact that it’s still struggling with refund complaints. This past summer, the company held the dubious distinction of getting more refund complaints in the U.S. than any other airline — and this for an airline that doesn’t even crack the top three North American carriers by passenger volume!

You may have heard back in March that Air Canada was taking heat for COVID-19 impacted customers vouchers instead of refunds. That issue is actually still ongoing. The company has begun offering refunds to some customers, but not all of them. Meanwhile, people are complaining that they aren’t even receiving the vouchers they had been promised. According to the law firm EvoLink, the class action over vouchers still ongoing.

Foolish takeaway

It doesn’t take a genius to notice that Air Canada is behaving strangely in 2020. Between refund denials, voucher delays and travel passes, the company is flailing about with no idea what to do. If you look at the company’s 2020 stock chart, it’s not hard to see why its management is getting desperate. It’s facing a mountain of problems that it just can’t deal with.

On the other hand, these stocks may do better...

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Andrew Button has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.