Air Canada (TSX:AC) saw shares dip early on Wednesday after a report came out stating Air Canada stock cancelled 2,755 flights in January.
What happened?
Investors reacted poorly to the news that Air Canada stock had to cancel almost 3,000 flights due to travel restrictions and the swell of the Omicron variant last month. The cancellation of 2,755 flights represented 12% of total scheduled flights, according to aviation data company Cirium. This compares to 6% cancellation in January 2020, or 2,651 total.
The cancellation is mainly blamed on the Omicron variant. Staff and labour shortages seriously hampered flights, along with the changes to government travel restrictions and cancelled bookings. Air Canada stock was one of many Canadian airlines begging the Canadian government to relieve travel restrictions for fully vaccinated individuals.
“Since the pandemic began, we have been adjusting our schedule in response to, among other things, government restrictions, the trajectory of COVID and market conditions,” Air Canada spokesperson Peter Fitzpatrick said. “At this time, we have no update on schedule changes other than those we previously enacted.”
So what?
It’s a big blow to Air Canada stock. The company believed the worst was over last summer. Travel restrictions eased, and the worst of the pandemic seemed to be over — especially with vaccination rates increasing. But as the Omicron variant became an increasing concern, non-essential travel again became advised against by the government once more.
Air Canada stock reported revenue that was three times higher than the third quarter of 2020. Its operating loss fell by half to $364 million, with record cargo coming in that passed the billion-dollar mark.
Air Canada stock seems to be continuing to align itself with these other streams of revenue. Its Aeroplan loyalty program continues to expand, and it’s been making partnerships with even more credit card companies. Furthermore, it’s been expanding its cargo program as well. All of these are solid long-term revenue streams for when the pandemic ends.
Now what?
But for now, the pandemic isn’t over. Air Canada investors are waiting on further guidance from management. Fourth-quarter results are due Feb. 18, and it’s looking like the hoped-for holiday rush may not be so high as hoped.
Analysts as well point to the incredible increase in jet fuel prices, which will weigh on Air Canada stock and others as well. As companies try to aggressively create cheap prices, inflation and jet fuel costs will seriously bring down revenue. While analysts believe Air Canada should outperform, they have also been cutting back the stock even further. The average target price remains at around $29 per share, as of writing.
