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Air Canada (TSX:AC) inventory has been buying and selling positively for the final 4 months. Final week, AC inventory remained combined after posting stable 16.3% good points within the week ended on March 18. Nonetheless, it’s step by step extending good points, because it has already risen by practically 3% this week up to now. Whereas uncertainties associated to the current Russian invasion of Ukraine have elevated the volatility in Air Canada inventory, traders’ optimism about air journey demand restoration appears to be stopping any massive pullback in it. With this, AC inventory is now buying and selling with 16% year-to-date good points.
Earlier than I talk about whether or not the continued Russia-Ukraine disaster nonetheless has the potential to hammer Air Canada inventory within the close to time period, let’s check out the corporate’s current efforts to assist Ukraine.
Air Canada’s efforts to assist Ukraine
After the Russian invasion of Ukraine began on February 24, Air Canada has proven its willingness to assist Ukraine and Ukrainian refugees on a number of events. On March 9, the Canadian flag provider operated its plane providers to move medical gear and different humanitarian provides for Ukrainian refugees.
Final week, Air Canada expanded its initiative to assist Ukraine by saying that “it is going to be donating $10 for each reserving made on aircanada.com to assist Ukraine reduction assist, with a complete donation of as much as $250,000.”
Might the Russia-Ukraine conflict hammer Air Canada inventory?
Plane gasoline is without doubt one of the greatest bills for airline firms, together with Air Canada. Because the Russian invasion of Ukraine and associated Western sanctions on Russia have disrupted provide, crude oil costs just lately soared to their highest stage in additional than a decade. Whereas the continued Russia Ukraine negotiations have helped ease oil costs a bit currently, WTI crude oil futures are nonetheless buying and selling with greater than 40% year-to-date good points.
As well as, the potential for an extra rally in oil costs stays open amid ongoing geopolitical uncertainties. This commodity market pattern may considerably enhance Air Canada’s working prices within the coming quarters — probably delaying its monetary restoration additional and driving AC inventory decrease.
Notably, Air Canada spent about $1.58 billion on plane gasoline in 2021 — greater than $1.32 billion within the earlier 12 months.
The bull case for Air Canada inventory
Clearly, rising plane gasoline bills may additional enhance Air Canada’s value burdens and harm its monetary restoration within the post-pandemic period. That mentioned, the current indicators of a spectacular restoration in air journey demand may maintain traders’ confidence alive. In February, Air Canada’s administration highlighted “strong advance ticket gross sales” and pointed to “unmistakable indicators of revival.” If the air journey demand continues to surge amid reopening economies, it may assist the biggest Canadian passenger airline firm to offset the adverse impression of upper gasoline prices on its total enterprise to some extent.
However once more, given the continued uncertainties concerning the Russia-Ukraine disaster, it’s extraordinarily troublesome for anybody to precisely predict the conflict’s potential impression on Air Canada’s enterprise for the time being. Nevertheless, traders nonetheless could need to stay cautious and keep away from making large bets on Air Canada inventory’s anticipated massive restoration for now.
