Why Air Canada Stock Rallied 16% This Week

Air Canada (TSX:AC) stock rose 16% on Friday, as the company made two announcements that sent investors buying back the stock.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published March 18, 2022 12:30 pm EDT

| More on: AC

Air Canada (TSX:AC) shares climbed a whopping 16% this week, with news that Air Canada stock would be adding more flights and removing COVID-19 restrictions.

What happened?

Air Canada stock saw a lot of upward momentum this week due to two announcements that led the stock movement. Of course, the biggest was the Government of Canada’s announcement that it would be removing pre-departure testing requirements on Apr. 1, 2022, for passengers who are fully vaccinated coming back to Canada.

But it wasn’t the only reason shares of Air Canada stock climbed. The company also announced the addition of several resumed flights to the South Pacific, including Brisbane and Aukland. The news sent shares up 7% on Wednesday, and the government’s announcement led it to climb another 3% at Thursday’s close. The company is up another 3% on Friday, as of writing.

So what?

It’s clear why this news is a big deal for investors. While the pandemic seems to be far from over, the world is moving on — especially if you’re fully vaccinated. In the case of Air Canada stock, this likely means the company can move on as well. Not only can it hopefully get back to the tourism it once had, but hopefully also enjoy a return to business flights as well.

Either way, the combination of no restrictions for fully vaccinated individuals and new South Pacific flights is perfect timing. Canadians are thinking about holiday travel for the summer, and the company has already seen an increase in bookings. Therefore, the company could in fact see massive earnings this summer, and perhaps return to pre-pandemic levels.

Now what?

The only fly in this ointment is China. China is currently under several lockdowns across the country as a fresh wave of COVID-19 continues to spread. There are a few reasons that Air Canada stock investors should then watch out in the future.

The first is the obvious; if there is a rise in China, there could be a rise across the seas very soon. And with the addition of new flights in the South Pacific, a travel destination for many in Asian countries, it could come to Canada sooner as opposed to later. This could lead to a reversal of adding restrictions once more.

Should that happen, the second issue is that Air Canada stock simply has a lot of competition when it comes to the more popular sun destinations. Its competitors have practically cornered the market, whereas Air Canada continues to hope business flights will return. So, keep your eyes to the skies, Fools, and be wary of what happens next.