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Air Canada T.AC

Alternate Symbol(s):  ACDVF

Air Canada is an airline company. The Company is a provider of scheduled passenger services in the Canadian market, the Canada-United States (U.S.) transborder market and the international market to and from Canada. It provides scheduled service directly to more than 180 airports in Canada, the United States and internationally on six continents. The Company’s Aeroplan program is Canada's premier travel loyalty program, where members can earn or redeem points on the airline partner network of 45 airlines, plus through a range of merchandise, hotel and car rental rewards. Its freight division, Air Canada Cargo, provides air freight lift and connectivity to hundreds of destinations across six continents using its passenger and freighter aircraft. Its Air Canada Vacations is a tour operator, which is engaged in developing, marketing, and distributing vacation travel packages in the outbound/inbound leisure travel market. Air Canada Rouge is Air Canada's leisure carrier.


TSX:AC - Post by User

Post by logicandinertiaon May 08, 2020 9:24am
416 Views
Post# 31002171

Bond pricing needs to be watched

Bond pricing needs to be watched

Keep an eye on the debt markets for airlines.  United have been trying to do a $2.25 billion bond deal backed by unencumbered aircraft.  Started marketing around a 9% yield and now pricing has moved coupon to 11 %.   Reflecting the markets uncertainty around residual asset value of aircraft.


United's existing bonds have plummeted and trading in the 60s.  This usually happens when equity is worthless.  For those who say this doesn't matter for AC because "it is different", recognize that pricing changes in the debt markets and the demands of the debt buyer for big deals does have knockover effects for everybody.  Look at the correlation  between debt and equity in various mkt segments.  When the Fed started buying and stabilizing bonds, equity obviously got a big bump.  

For airlines, it isn't about the equity right now , but more about the ability for airlines to refinance debt.  Keep an eye on the pricing for Air Canada's bonds.   When they bottom and turn, likely a great time to buy the equity.   Debt holders are first in line, equity holders are behind them.   If debt holders are confident about AC's future, then good picture for equity.   

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