With bookings for flights from Canada to the United States down by 75% for the upcoming summer season, the boycott movement is a reality, which will delight Donald Trump's opponents, but will severely penalize the airline - along with its compatriot WestJet - in 2025.
As a result, the share price has plunged back to its ten-year lows. At this time last year - well before the antics of the new American president - MarketScreener was already warning that this eventuality was likely to occur, despite seemingly attractive valuation multiples.
Indeed, in addition to an excellent tourist season in the wake of the reopenings and the end of covid, Air Canada's results had been boosted by a very favorable currency effect linked to the weakness of the Canadian dollar and the unusual strength of the US dollar.
This enchanted interlude could not last. In 2024, booking growth was anemic, and an unfavorable currency effect cost the company a whopping $400m, more than last year's providential gain.
Unsurprisingly, operating profit was halved - despite oil prices, which were even eroding significantly - while pre-tax profit quadrupled. Net income resisted better, thanks once again to an exceptional item: a $1.2bn tax refund.
Free cash flow benefited from another exceptional item - for the first time in twelve years, the sale of short-term investment instruments. This enabled the company to reduce its debt significantly, by $2.4bn, and to direct $473m towards share buybacks.
MarketScreener analysts were dismayed by this decision. Between 2015 and 2020, like other US airlines, Air Canada had been directing its cash flow towards share buybacks, only to run out of cash when it had to absorb the $6bn in losses caused by the pandemic.
In any case, without these two other providential elements in 2024, Air Canada's cash flow would barely have been enough to cover its investments. The market was not fooled: after a brief upturn at the end of 2024, it sent the share price back to its lows.
