Shares of Air Canada (TSX: AC) just cannot catch a break. While the company continues to see demand rise from bookings, it also continues to see a share price that only falls lower and lower. But does that make it a deal or a complete dud?
Back from the ashes
It’s been a long road for Air Canada stock after the pandemic sent shares into the toilet. Yet the company went into the pandemic with better finances compared to their United States peers. Because of this, and with help from the government, it has been able to return to a profit in the last year.
Now, the company has seen demand explode. But how can the company make this last? After all, about 70% of its revenue comes from trips that began or ended outside of Canada. Then 20% were to or from the United States. In the past, the company was able to capitalize on long-haul international routes that had layovers in Canada. However, that may not work so well in the future.
There have been a lot of changes from the pandemic. A shake-up in the airline industry meant perhaps Air Canada stock couldn’t do what has been successful in the past. While capacity and passenger loads will certainly reach pre-pandemic levels in 2024, what then?
Things changed
Before the pandemic, businesses would have employees book their flights through the corporate account. This would allow for bulk discounts on getting a seat at the last minute on these business flights. However, the pandemic changed this.
Airlines are now shaking things up, and Air Canada stock may have to find new and innovative ways to keep and attract business clients. What’s more, there is the leisure aspect to think about. Air Canada stock was focused on low-cost carriers before the pandemic, but with so much competition in this space, the company may need to focus on rewards for brand-loyal travellers instead.
So, while the short term looks bullish, it’s the longer term where Air Canada stock might have some problems. And those problems seem to have seeped into their share price. So, what should investors do now?
Bottom line
Record revenue and bookings are now on the books, and the company is profitable once more. Demand remains high, but 2024 could be difficult. Canadians are cutting back, along with the rest of the world. So, the pent-up travel demand from the pandemic may be slowing in the next year or so.
For Air Canada stock, it will need to set itself apart from the rest. Sure, it can have those low-cost airlines. However, the success of other companies has been to focus on what they’re good at. For Air Canada stock, that’s a comfortable experience for long-haul flights.
Investors could see more long-term growth from this company. It’s one to watch out for beyond 2024 — even for investors getting in at this share price, as they continue to be wary about Canadian airlines.
