Air Canada T.AC

Bankruptcy: Wishful thinking Vs Facts

[Rouge10]

With recent conversations on chances of Bankruptcy, let's analyze and evaluate factually.

       
                                         Wishful thinking                                         Facts
1. Cash burn             Bllions per day/month/quarter?      Projected for Q3: $3-$5/day = $360M/Q
2. Cash at hand                 Very low                              $9.8B (highest liquidity ratio in industry)
3. # of Qs for cash burn    Already here                              27 Quarters (8 years+) before cash burns out
4. What will AC do            nothing, wait it out                Manage capacity, Focus Cargo & Credit card, etc etc...

My analysis:

Projected Q3 cash burn is at projected 35% capacity (of Q3 2019). But it is clear from data that they are running at 60% capacity instead. They will not  only be cash burn neutral already and might as well be positive in Sept and Q4 and going forward. It means, the liquidity levels will stablize first and then begin to increase. 

Bankruptcy is a wishful thinking. This fear is what shorters cashed out in March 2020 and many people not understanding the AC business model took the bait. And this Q is the last Q where shorter have any chance of creating fear in investor's mind, because once the Q3 results are out, they won't be able to influence. Facts will be out in the market.

Now, what will they AC with that much cash? Should they pay off the debt or .....I suggest don't worry about debt (low cost debt) and focus on adding more value. Debt can be paid off anytime. Oh yes, Govt. money not needed.

COVID: Double vaccinations are working. Most of the cases in hospitals are unvaccinated. E.g. In Alberta 93% of the hospitalizations are full unvaccinated. In ON, people still wear masks till more are vaccinated and it works beautifully. AB, welcome to the club. And guess what, only fully vaccinated travel via air. Vaccinated are no longer the problems. You can't shut them down anymore :).

[Rouge10]

Correction: It is ~7 years (27/4) instead of 8 years at the projected cash burn rate of $4 /day (Avg of $3-$5M/day) for Q3. 

[Pachuko]

The fact that we continue to need to talk about cash burn rates not revenue increases is why this is in trouble. The upside here was a return to normal over a year ago not a continued cash burn, declining rate of bookings and cancellations of booked flights. At some point the bleeding needs to be looked at as more than how much of the current cash available is being evaporated and how many months

[Rouge10]

In case you were not able to read the post completely :) Here is the excerpt from last post on what I think on improving cash flows based on higher revenue. Revenue will increase (though slow growth) but profitability will be higher compared to same revenue pre pandemic (2010 -2019 years).  ************************************************** "My analysis: Projected Q3 cash burn is at

[Pachuko]

Here are the facts from the airlines not someone putting out theories and painting forgeries! https://www.wsj.com/articles/u-s-airlines-warn-of-dimming-outlook-amid-delta-variant-11631188178?mod=hp_lead_pos2

[Frenchonporch]

can you copy that WSJ article? i cannot access it.

[givemeabreak1]

Frenchonporch You cannot access it as you are not a subsciber.  Use the link and look under the picture it will show you a little arrow that allows you to listen to the artice.  The whole article is read to you if you click on the listen arrow.

[Invinceableone]

This post has been removed in accordance with Community Policy

[Rouge10]

Another set of facts for US Vs Canada: Vaccinations: In US vaccination rates are far lower than Canada. Also, the range is huge with states like Alabama at 40% and states like Massachusetts at 67%; mostly lower than most Canadian provinces. Canadian average is close to 70% (of all population) and first dose is much higher.  Travel: In US there was no vaccination condition put on travel and