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Air Canada T.AC

Alternate Symbol(s):  ACDVF

Industrials Airlines
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

Air Canada
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Post by zero2millionon May 27, 2015 7:22am
207 Views
Post# 23768242

Scotia's insight (May 26th, 2015)

Scotia's insight (May 26th, 2015)

AC opted out of the 2014 pension funding regulations and announced a NCIB for upto 10M shares (3.5% of shares outstanding).

The opt-out is not a surprise based on AC's pension surplus and previous management commentary. We continue to believe that de-risking the pension is one of the major achievements by AC's management team.

The pension opt-out provides flexibility with regard to both dividends and share buybacks. Considering that AC has significant capital commitments of ~$9B over the next few years for fleet purchases and wants to improve its balance sheet/ credit rating, timing of the NCIB is a little surprising. That said, the amountput to the NCIB is very small (~$120M-$130M at current share price levels) and the buyback program is discretionary.

The shares may react positively to the news especially as the NCIB should give management another tool to support the shares especially during periods of volatility. We expect more news at AC's upcoming investor day where management is likely to provide new targets on CASM & ROIC. Details of our expectations are highlighted in our May 13 note (Maintain SO Post Strong Q1). There is no change to our TP of $17.00. 


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