Log in
E-mail
Password
Show password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Air Canada shares close marginally lower after government takes equity stake

04/13/2021 | 06:17pm EST
FILE PHOTO: Air Canada airplanes are pictured at Vancouver's international airport in Richmond,

MONTREAL (Reuters) -Air Canada stock ended marginally lower in volatile trading on Tuesday on concerns that existing shareholdings would be diluted after the federal government took an equity stake in the carrier as part of C$5.9 billion ($4.7 billion) in aid.

Analysts and investors said Air Canada's decision to accept the bigger-than-expected aid package was the right decision for Canada's largest carrier as it tries to cope with the crippling downturn in air travel caused by the coronavirus pandemic.

"Definitely a positive development because it's giving them access to a very attractively priced backstop credit facility at very reasonable terms," said Catharine Sterritt, portfolio manager at CIBC Asset Management, a top shareholder.

The deal announced on Monday gives Ottawa a roughly 6% stake in the airline at a discount of 14%, which prompted several analysts to cut their price targets.

"We believe some investors could be negatively surprised by equity dilution and a repayable loan for refunds," Scotiabank's Konark Gupta wrote in a note, while reiterating a "sector perform" rating on the stock.

Air Canada shares opened more than 4% higher before sinking about 6.7% and closed down 0.44% at C$26.88 in Toronto.

"In spite of the dilution we see, we still see a path for this company to be worth in excess of at least C$40 when the COVID situation and the airline situation normalizes all a bit more," Paul Younes, an investment analyst at Letko Brosseau and Associates, which holds the stock, told Bloomberg TV.

Canada is wrestling with soaring COVID-19 cases driven by coronavirus variants and a comparatively slower vaccination rollout than in the United States, raising questions about the reopening of air travel.

"The bigger issue for AC and its investors is the timing around the vaccine rollout and eventual lifting of travel restrictions, as most markets that have reopened show strong pent-up demand," Raymond James analyst Savanthi Syth said in a note.

Prime Minister Justin Trudeau on Tuesday praised the deal with Air Canada as "good and fair."

The agreement - the largest individual coronavirus-related loan that Ottawa has arranged with a company - came after the airline industry criticized Trudeau's Liberal government for dawdling.

TD Securities analyst Tim James said the access to capital would prove to be insurance as opposed to necessary liquidity required to finance operations or capital expenditures in 2021 and beyond. He cut his target price on Air Canada to C$29 from C$31, while reaffirming a "hold" rating.

Air Canada would ease restrictions on future refunds for passengers, a key part of the government talks.

Canada's government also is engaged in aid talks with WestJet Airlines Ltd and Transat AT Inc.

($1 = 1.2589 Canadian dollars)

(Reporting by Allison Lampert in Montreal and Ankit Ajmera in Bengaluru; Additional reporting by David Ljunggren in Ottawa and Maiya Keidan in Toronto; Editing by Paul Simao and Peter Cooney)

By Allison Lampert and Maiya Keidan


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AIR CANADA -2.65% 22.37 Delayed Quote.9.70%
BELIEVE -5.26% 15.594 Real-time Quote.-2.59%
EURO / CANADIAN DOLLAR (EUR/CAD) 0.24% 1.41922 Delayed Quote.-0.56%
RAYMOND JAMES FINANCIAL, INC. -2.60% 102.21 Delayed Quote.4.52%
TRANSAT A.T. INC. -3.62% 4.53 Delayed Quote.16.63%
Latest news "Economy & Forex"
05:56pKorean air says it will fly 777 and 747 planes to u.s. as originally scheduled after updated faa guidance on 5g rollout
RE
05:47pBiden predicts Putin will 'move in' to Ukraine
RE
05:44pWorld Bank chief takes swipe at Microsoft's $69 billion gaming deal as poor countries struggle
RE
05:40pUS EEOC, DOL Launch Hiring Initiative to Reimagine Equity
DJ
05:39pU.S., UK launch talks to resolve steel, aluminum dispute, address excess capacity
RE
05:34pDogecoin Lost 2.76% to $0.162 at 5 p.m. ET -- Data Talk
DJ
05:34pEthereum Lost 1.57% to $3114.58 at 5 p.m. ET -- Data Talk
DJ
05:34pThe WSJ Dollar Index Falls 0.19% to 89.43 -- Data Talk
DJ
05:34pBitcoin Lost 1.56% to $41739.43 at 5 p.m. ET -- Data Talk
DJ
05:34pEuro Gains 0.14% to $1.1344 -- Data Talk
DJ
Latest news "Economy & Forex"