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AC Full Year


deicer

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12 minutes ago, inchman said:

I'm not sure where you're getting your stuff from, either because the corporate financial report above clearly indicates a Q4 operating margin of 5%; an INCREASE of 1.6% over last year. Yearly operating margin was 10.8%. I'm not sure how that compares with other airlines and I know that Westjet's margin is greater, but Air Canada grew by 9.6% last year, Westjet grew by 0.6%. Wasn't too long ago that those numbers were reversed. 

 

 

AC is the only airline that doesn't include interest expense as an operating expense. Add it in and its operating margin in Q4 was 1.45%. 

 

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5 minutes ago, CanadaEH said:

AC is the only airline that doesn't include interest expense as an operating expense. Add it in and its operating margin in Q4 was 1.45%. 

 

With it's great operating margin why isn't Westjet trading higher?  Seems to me that the market's perception of value, or future prospects, is not the same as yours.

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3 minutes ago, inchman said:

Even with the drop on the day following the conference, AC shared traded above where they traded for most days in February, including 2 days prior. The "huge" drop was probably due to those same short term investors Rovinescu says he is trying to shake driving up the price by 12% on the 16th. 

Since Feb 1st, the TSX is basically even, AC is down 8% and WJ is down over 20%. Maybe WJ should have made the same announcement. Since the beginning of the year, AC and WJ stock has performed within about 0.5% of each other. 

So, for all of the doom and gloom being thrown around based on either the results or the change in reporting, not much happening.

WJ's shares are down more because of its reliance on the domestic market (40% WJ and 25% AC, if I'm not mistaken) which is obviously not doing well. The drop and difference has less to do with the change of reporting monthly stats, IMO. 

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1 minute ago, seeker said:

With it's great operating margin why isn't Westjet trading higher?  Seems to me that the market's perception of value is not the same as yours

The share price isn't based on what you've done its based on what you're going to do, IMO. 

The next year is going to be challenging for WJ. 

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35 minutes ago, deicer said:

That is exactly my point.  It is about what the 'Institutions' want. Not necessarily what is good for the company.

That's why I think it is irrelevant what a stock price is as long as a company is productive, providing a good service, paying decent wages, paying it's bills on time, and if at the end of all that if it has one dollar left over as profit, it is successful.

This is why you are seeing voters turn away from the 'establishment'. 

It isn't about the investor, it is about the customer and the employee.  You will always get investment if you provide a good service to the customer and take care of your employees who provide that service.

I see AC now going in that direction and I feel it's a good thing.

 

 

 

The point being that companies cannot continue to do those tings that you listed indefinitely with their shares in the gutter, e.g. BBD, Nortel, Enron, or Air Canada itself before its bankruptcy. Speaking of which, after its bankruptcy and restructuring which meant cancelling the old AC shares, the new Air Canada that was bankrolled by Lufthansa and other venture capitalists did not have to become a public company, they could have continued as a private company and it would have been no one's business except its stakeholders how it ran its business. But at some point, its stakeholders decided to cash in their investment for a good return and sold their shares divided in smaller public shares to the, well public! Therefore, it would not be very nice to tell these investors (the public) that as long as the employees and suppliers get paid, we don't care about you! This becomes more difficult for more progressive companies like WestJet since its staff are also its owners! The "shares" through the investors, whoever they may be on any given day, are part and parcel of the whole package. Just as it would not be nice for a company to be entirely focused on its investors and forget its employees or suppliers, the opposite is also true. The art of business leadership is in striking a balance.

Besides, you may be looking at this from the perspective of an employee who as long as is employed, paid and happy everything is fine, but it's not as though some evil folks from another world are the "investors". The investors are basically average people, grandparents, teachers, nurses, factory workers, truck drivers, perhaps even pilots and mechanics and deicers(!), who have bought into these stocks through their retirement savings and such. These are the people on behalf of whom "institutional investors" buy into these stocks. Their focus is naturally on providing a return for their clients. As one of these people, would you invest in a company whose shares continually slides, doesn't pay dividends, is not transparent, and says if you don't like it you can short our stocks? I think not! 

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MD2, I'm a shareholder in AC, in fact, I'd be willing to bet that I'm a bigger shareholder in AC than most Westjet employees are in Westjet.  Obviously I care about the share price but I care a whole lot more that the company is managed properly.  CR has not said that he doesn't care about shareholders, he's said that he, and the rest of the management team, are managing for the long term viability of the company and not to please short-term investors or shorters who might try to capitalize on insignificant price fluctuations.  How can anyone argue about that sentiment?  You, and others, have postulated that this is simply a way for the company to temporarily hide bad news for the next few months - well, I guess we'll see in a few months won't we.  Personally, I'm quite happy with what he's achieved and am more than willing to go along with this new plan.  If the share price takes a hit and the trading volume drops for a while until the market adapts - fine - assuming, of course, that the improving trend in the company's performance continues.

 

BTW, I don't think there are many institutional investors (mutual fund managers) who have purchased Air Canada shares, probably because of the volatility.  Reducing this volatility may result in more fund mangers buying in.

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Thanks for your thoughts MD2.
 
No one would ever call me a savvy investor, it’s a black art that’s mostly above my pay grade. Accordingly, I use other metrics to weigh corporate performance, which includes the structural changes I can see.
 
For instance, it’s no secret that AC spent the better part of two decades embroiled in extremely costly labour relations nightmares, but by whatever means, CR was able to wrestle control back from the rebels and get very long term collective bargaining agreements. I see that alone as a monstrous success and feel CR deserves credit for same.
 
I acknowledge your analysis for the near future, but because of my fore-mentioned limitations I really can’t debate the issue. Instead, I cover the potential for what I see as the voodoo marketplace economics of this industry in the simple category of ‘fickle’ and often unpredictable. In this area I'm considerably more comfortable reading and sifting through the learned comments of other posters.
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I think predicting the market is difficult no matter what, but the point being that while WestJet was taking the beating, at least it took it standing without asking for favors, special deals, or chastising the traders for being too mean, meanwhile Air Canada was standing in the corner pretending nothing was wrong, and even when the numbers came out, it tries to blame the investors for shorting its stock which was clearly headed for the gutter, that's all. A company that is expecting to do well in the year will not be less transparent and these sentiments are and will continue to be reflected in its Air Canada's share prices. At least the next two quarters will be very challenging for Air Canada and other factors mentioned as an achievement will likely weigh down even more on the stock and will not be viewed positively in the market.

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1 hour ago, MD2 said:

I think predicting the market is difficult no matter what, but the point being that while WestJet was taking the beating, at least it took it standing without asking for favors, special deals, or chastising the traders for being too mean, meanwhile Air Canada was standing in the corner pretending nothing was wrong, and even when the numbers came out, it tries to blame the investors for shorting its stock which was clearly headed for the gutter, that's all. A company that is expecting to do well in the year will not be less transparent and these sentiments are and will continue to be reflected in its Air Canada's share prices. At least the next two quarters will be very challenging for Air Canada and other factors mentioned as an achievement will likely weigh down even more on the stock and will not be viewed positively in the market.

Give it a break already.  You're getting to be worse than Bean was.  Not everyone agrees with you anyway, here are comments from The Motley Fool regarding AC:

 

Air Canada - Motley Fool Comments Feb 20th


Air Canadas 2015 full-year results are positive

For the full year, Air Canada reported adjusted net income of $1.222 billion, or $4.18 per diluted share. This represents a massive 130% increase over the 2014 full-year figure, which came in at $531 million, or $1.181 per share. Operating income was also record setting with the company posting $1.496 billion in 2015, an 83.6% increase over the 2014 figure of $815 million. EBITDAR came in at $2.534 billion, which is significantly higher than the $1.671 billion reported in the prior year. EBITDAR margins came in at 18.3%, exceeding not only the 2014 figure, but also surpassing the figure noted during the companys 2015 Investor Day target. The impressive results shattered last years results, which were record breaking at the time. The company has been focused on international route expansion, cost-cutting, and value-enhancing initiatives over the past few years, and the results now speak for themselves. The company is forging ahead with a fleet modernization with the focus on adding seats, flying more efficient planes, and moving seats and planes to where they will be most used. Air Canada is turning to Bombardier Air Canada also announced the intent to purchase 45 CSeries jets from Bombardier, Inc. (TSX:BBD.B) with a further option available for 30 more. This is quite possibly the best news the struggling company could have hoped for, as it has been waiting over a year for an airline to come forward with an order for the new jet. Bombardier was up on the news by an impressive 18%. Beyond the lifeline that this deal represents for Bombardier, the order is the sheer genius for Air Canada and will have investors very pleased. The CSeries is an extremely fuel-efficient plane. It is uniquely placed in the market between commuter-class planes and wide-body jets in the 100-180 passenger range, which is currently under-served. Given that fuel costs were 39% lower in the most recent quarter, replacing older, less efficient aircraft with newer, more efficient aircraft will help lower costs further in the long run. On the other end of the fleet, Air Canada is looking at adding seats to the large wide-body Boeing 777 aircraft that are used for long-distance international travel. Air Canada will also continue to update the international fleet with the new Boeing 787 Dreamliner, which is more fuel efficient than the older 767 it is replacing. Yet more international expansion? Nearly two-thirds of Air Canadas revenue is from the companys international routes outside the country. This has shielded the airline from the slowdown in Alberta, where demand for travel in and out of the province has declined significantly. Looking ahead to the next year, the company stated that nearly 90% of all capacity growth is expected to be from the international markets the airline serves. Larger aircraft that were used in Alberta during the growth years can be re-deployed to other routes that are seeing growth, such as in the eastern side of the country.
Looking back over the years, the international exposure is one of the most compelling reasons I am excited about this stock. The Air Canada of several years ago had a tiny international presence and was losing customers as Canadians were forced to pick another airline for international travel. The more countries and destinations Air Canada serves, the more revenue the company will generate from both within and outside the country.

Given that the stock has dropped considerably this week, Air Canada might be one of the best deals on the market at the moment.
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22 minutes ago, MD2 said:

Speaking of Bean, looks like he was right and there is no point discussing geography with those who think the earth is flat!

What was he right about - that AC was going to have it's best year ever and that Westjet was going to be talking about layoffs?  Oh yeah, he didn't say that.  Yes, yes, I know, Westjet and Porter are kind, gentle places while Air Canada is evil, mismanaged, self-entitled, etc, etc.  Carry on then.

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The market is never wrong.

AC and WJ shares are being hammered because at a time when spot fuel pricing is at an unexpected and unusual low, the yields are still not trending upwards. That means a shortage of demand either because of overcapacity or a questionable underlying economy.

The US legacy carriers are declaring profits in the $billions$. Meanwhile, the 2 largest CDN carriers are still battling over a relatively small marketplace and adding double digit capacity in to a weakening economy. 

The market wants to see increasing yields and capacity discipline. And the market wants to see statistical transparency.

So for now, it would appear that both CDN airline stocks will languish until the market gets the news that it wants to hear. All of the rhetoric and cheerleading on this and other sites will not change that. 

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Too much capacity has been added at way too low prices that is worse for AC since its cost remains at least 25% higher than WestJet. As well lower yields in Asia, South America, EU due to AC's pricing and chasing of various traffic and carriers on those routes, have contributed and will continue to weaken AC stock beyond overcapacity and the change in reporting is really viewed as a way to mask the problem over the next two quarters, not the problem itself, plus there are other dubious explanations and in its reporting. 

WestJet too will have a challenging time over the next two quarters since a larger portion of its revenue comes from the domestic market, but at the same time it's not selling cheap last minute tickets to Hong Kong either! However, LGW is not part of its problem, rather part of the solution as it gradually avails itself to the low hanging fruits in the untapped EU market. This is why AC shares will likely slide more as the prospect of a return, especially with no dividends, seems very illusive to investors.

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12 hours ago, seeker said:

What was he right about - that AC was going to have it's best year ever and that Westjet was going to be talking about layoffs?  Oh yeah, he didn't say that.  Yes, yes, I know, Westjet and Porter are kind, gentle places while Air Canada is evil, mismanaged, self-entitled, etc, etc.  Carry on then.

You're much more defensive than usual, seeker. AC had a great 2015, no doubt about that but Q4 was terrible. Much worse than most anyone expected. Q1 and Q2 will be very telling but I doubt they'll be anything remotely like 2015. 

WJ will be in the North Atlantic in a big way starting in May and this will have a negative effect on AC's premium yield. How much remains to be seen but I suspect it will be substantial.

interesting days...

 

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14 minutes ago, Maverick said:

 but Q4 was terrible.

 

What was so terrible about it?

Sure Yield dropped but that is to be expected as seats are added into a market (let alone into the same flight/aircraft).  Did anyone expect Yield to increase?

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20 minutes ago, Fido said:

What was so terrible about it?

Sure Yield dropped but that is to be expected as seats are added into a market (let alone into the same flight/aircraft).  Did anyone expect Yield to increase?

It had the worst result of any NA airline at 1.45% operation margin. The next closest was Skywest (4.4%). 

A profitable quarter is better than a loss. So that's an improvement. There is nothing wrong with pointing out that things are not as great as they appear. I can say that about my (WJ) airline - it's in for some tough times. We're probably around the middle of the pack for profitability. That's disappointing for me and the market, but not surprising given what rudder mentioned in an earlier post.

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13 hours ago, seeker said:

What was he right about - that AC was going to have it's best year ever and that Westjet was going to be talking about layoffs?  Oh yeah, he didn't say that.  Yes, yes, I know, Westjet and Porter are kind, gentle places while Air Canada is evil, mismanaged, self-entitled, etc, etc.  Carry on then.

Who said AC is evil, mismanaged, self entitled, etc.? I don't see anyone saying that in this thread. 

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6 hours ago, CanadaEH said:

Who said AC is evil, mismanaged, self entitled, etc.? I don't see anyone saying that in this thread. 

It's not in quotes so I didn't mean that it was said directly.  What I meant was that almost every post MD2 makes includes some negative or disparaging comment about AC - gets tiring.

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7 hours ago, Maverick said:

You're much more defensive than usual, seeker. AC had a great 2015, no doubt about that but Q4 was terrible. Much worse than most anyone expected. Q1 and Q2 will be very telling but I doubt they'll be anything remotely like 2015. 

WJ will be in the North Atlantic in a big way starting in May and this will have a negative effect on AC's premium yield. How much remains to be seen but I suspect it will be substantial.

interesting days...

 

More defensive than usual?  So that's a lot then?  :huh:  :D

 

The street was expecting .45/share and AC made .40/share in Q4 but the yearly stats were considerably better than anyone expected.  Obviously the big question is whether or not the trend will continue or increase in magnitude in 2016 (note that there was still a profit in Q4, just slightly less than expected).  I think both AC and WS are oversold.  Westjet's revenues may fall but they are well-run, have low costs and make a ton of money so there's no valid reason for the share price to have been cut in half since last year.  Air Canada is reducing costs, signing 10 year labour agreements every second week, getting pension plans into surplus, etc, etc.  Even if revenues drop both airlines are relatively strong and starting from a good place.  As for WS flying the Atlantic in May - maybe they will do their "stimulate traffic" trick and more people will be flying?  In any case, AC has been flying the Atlantic for a loooong time, I think we will be competitive and hang on to the premium passengers and WS will likely find that servicing a long route with a handfull of aircraft is harder than it seems.

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