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AC May Not Make Profit

Tue Mar 22, 2005 3:46 am

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RE: AC May Not Make Profit

Tue Mar 22, 2005 3:52 am

Air Canada was pretty quick to refute Bloomberg's statements...
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RE: AC May Not Make Profit

Tue Mar 22, 2005 3:54 am

Very interesting article, I wonder how the shareholders are going to take this news. I mean what's the point of holding shares in a company that may never make money. As for ditching there business plan because of this, where does it leave them? Will the eventually go back into bankruptcy because of this?
"All great things must come to an end"
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RE: AC May Not Make Profit

Tue Mar 22, 2005 4:02 am

I don't think the company will go back into bankruptcy protection. But this isn't good news. Shares are already down $0.50 to $34.10 on the TSX as of 14:00. Fuel prices are not helping any of the airlines though, but Jetsgo's demise will help both Westjet and AC.
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RE: AC May Not Make Profit

Tue Mar 22, 2005 4:05 am

Quoting AC7E7 (Reply 3):
Jetsgo's demise will help both Westjet and AC.

I agree. I believe we can expect to see a return to profitability for AC this year.
Bad spellers of the world... UNTIE!
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RE: AC May Not Make Profit

Tue Mar 22, 2005 4:08 am

Well the AC release states the quotes and information may have been used out of context, which is possible considering the information used seems to point to the necessity of timely and new aircraft deliveries to ensure growth and profit. Their finances this year will be very telling.
fuddle duddle
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RE: AC May Not Make Profit

Tue Mar 22, 2005 4:24 am

This is so boring. The Bloomberg article reached into the risk factors section of the MD&A that was written a month ago, and all businesses are required to express great candor in discussing risks. It's part of the boiler-plate of financial documents in this era of full disclosure. That doesn't mean that the risks are probables... Nor did Bloomberg discuss all risks, for example, a stronger than expected Canadian dollar. They discussed theoretical delays in the fleet restructuring - sure, it's theoretically possible that Embraer could be late delivering the E175 or E190. You have to state that risk. And the discussion of debt is automatic. However, just today, AC announced a new debt/equity issue and line of credit that actually lowers its interest costs and adds to its cash reserves, bringing them up to the C$2 billion level even after AC has made progress payments and equity payments on the regional jets delivered and being manufactured.

Of significance, AC said it still hopes to make its EBITDAR and is taking action to generate additional cost savings/revenues. AC could miss its EBITDAR but still make money, only less money than it had forecast.

Of significance, the MD&A was written before Jetsgo went under.

So it's wildly premature, even ridiculous, to take the MD&A risk analysis and spin that into a money losing year or discussion of a return to creditor protection.

And the reason the stock is off today is just as obvious: the issuance of new shares always dilutes everyone else's holdings.

Think of it another way. A consortium of leading Canadian financial institutions today entered into a pair of transactions to give AC a combination C$1 billion in new equity and investment grade debt and credit (not junk rates). There aren't two many airlines, certainly not traditional airlines, that can say that.
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RE: AC May Not Make Profit

Tue Mar 22, 2005 5:31 am

''The Circular provided an EBITDA projection of $1.6 billion for 2005, which was based on an assumed average 2005 crude oil price of approximately US $35 dollars per barrel for West Texas Intermediate (WTI) crude oil''

Looks like they need a new prediction model to project future oil prices...
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