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  5. AC: I have started travelling again and noticed that Air Canada flights are essentially full. [Air Canada Voting and Variable Voting Shares]
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Q: I have started travelling again and noticed that Air Canada flights are essentially full. I looked at a 3 year chart for the stock share price and it is down from about $50 to $18, obviously due to the pandemic. I noticed that you provided growth data in response to a question where the growth next year is expected to be 128%. This sounded good.

I used your symbol look-up tool to view the ACís profile and compared it to Delta Airlines (DAL). AC has 359M shares out compared to DALís 641M. ACís EPS and PB is -6.9 and 45.1 whereas DAL is +0.12 and 8.0. DAL is rebounded a bit more than AC but why was AC at $50/share anyway.

It seems to me AC is not managed well and probably has a lot of debt but your profile screen does not give me that info.

It seems DAL is much more attractive as an investment but I am just looking at very simple metrics. What are your thoughts, please?

Asked by Dan on October 24, 2022
5i Research Answer:

The competitive landscape in Canada is quite different, and to be political we can say that AC likely does not need to try so hard. It has of course had issues in the past with unions and bankruptcy. It is a different company today but of course not perfect. Fuel costs are in US$ typically which hurts. It raised money in the pandemic which diluted shares. Net debt right now is $8B. 12-month cash flow was $2.1B. 2019 cah flow, pre-pandemic, was nearly $6B. In a normal world, we would not consider the debt to be problematic. AC is expected to go from a loss to profit in 2023, on about 20% revenue growth. DAL will be profitable this year, but is expected to grow close to 75% next year. We would be happy owning either for a recovery. DAL has $22B net debt, vs $8B in normal-year cash flow. It is cheap at 11X earnings. AC grew sharply in 2018 and 2019 and made more than $5 a share in 2019. So $50 was only 10X earnings, before the pandemic changed everything.