Is Air Canada Stock a Buy After Reaching a Deal With Flight Attendants and Averting Disaster?
For a while, the situation was looking dire for Air Canada (TSX:AC). Flight attendants were on strike and defying back-to-work orders from the government. There was plenty of uncertainty and concern as to how things would play out. And then, suddenly, news of a tentative deal emerged.
It ended a short-but-concerning three-day strike which grounded hundreds of flights and disrupted the travel plans of about 500,000 customers. It took more than nine hours of mediated talks, but a deal was reached, which will introduce boarding pay for the first time.
The uncertainty due to the strike and the problems it has caused has resulted in Air Canada withdrawing its EBITDA guidance for the year. Previously, it was projecting an EBITDA of between $3.2 billion and $3.6 billion.
Shares of Air Canada are down 12% this year and the recent news hasn’t given the stock much of a boost. Concerns about the overall economy and a pullback on spending are likely still weighing on investors’ minds.
The airline stock trades at just five times its trailing earnings, as investors continue to price the stock at a discount given all the uncertainty around the business.
However, with limited competition in the airline industry in Canada, the stock can still make for a good long-term buy, even despite any short-term adversity. Air Canada stock is still nowhere near its pre-pandemic peak of more than $50. While it may not get back there anytime soon, it highlights just how much upside there may be for the stock in the future.
