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Discussion in 'Air Canada | Aeroplan' started by londoncalling, Jan 29, 2015.
If oil stays cheap and planes full I see that happening. They also will take delivery of more dreamliners and are opening new routes to the middle east and India. China flights sell a lot of full J seats and are always full.
Couldn't read the whole article (subscription needed) so I can't comment on it's entirety. But what happens when oil starts its climb back up, after OPEC has accomplished what it set out to do, that is drive out some of the weaker, smaller countries and companies, and they then decide to quickly regain some of their lost profits from the lowered pricing with a fast jump in price per barrel? Any serious outage or uprising in the ME could quickly cause the price of oil to jump rapidly too. And the costs for all the newer aircraft from Boeing will be continuous and mounting over the next few years, can AC maintain the same rate of profitability as they have now, for say, the next five years?
Looking good right now. Too many "if's" for the future, IMO.
The new aircraft were selected and ordered during the high oil prices, so they should be OK. For now, they'll reap some windfall profits due to lower fuel costs, hope they spend that money wisely.
The new aircraft surely have creative financing, not cash on the barrelhead.
I never buy an airline stock for the long haul as.. A. they don't pay dividends and... B. they are way too cyclical. that being said I have made good money on AC shares over the years by trading at opportune times...not always at the top or bottom but always successfully.
The traditional view of airline stocks, at least NAmerican airlines, no longer holds. Consolidation has finally brought about the rationalization required to stabilize the industry and reduce damage from competition. Refinanced balance sheets, new fleets and leases, reduced capacity, stable labour relations brought profits well before fuel prices dropped. That is the icing on the cake, a bump of a couple of percentage points on the profit line. AC's biggest problem at the moment is the impact of a low C$, though this really only affects items bought from the US (like Boeing plane leases, fuel). As well, US airlines are actually paying dividends, at least my AA stock is up 70%+ since April (maybe a quarter of that is the US$ vs C$ on my statements) and paid a dividend last quarter and will pay another any day now. Jazz/Chorus has consistently paid a dividend, albeit its share prices has declined about 30%...not really worth considering since most shares were spun off from Robert Milton's ACE which also provided shareholders several times its original value in Aeroplan|AIMIA and AC shares.
AC's original shares went for $8, rose to about $12 and then during the take-over flurry of 2000, rose to $16 when the company bought back 60% of everyone's holdings...which in effect yielded a $2 capital gain for those holding the stock since the IPO. The New AC has risen from just over $1 to its current $11-$12 range.
The airline play should last a bit longer, then it may indeed be time to cash out of any significant positions.