A couple of days in the past, I wrote an article on Air Canada (TSX:AC) inventory that outlined the three issues that mattered for the corporate on the time. The article outlined a number of main danger elements for the corporate that, relying on whether or not or not they materialized, may make or break the corporate’s near-term prospects. These danger elements included the looming Air Canada flight attendants’ strike, Donald Trump’s tariff insurance policies, and an ongoing improve in capital expenditures (CAPEX). Whereas these three developments are the truth is dangers for Air Canada, they’re additionally alternatives for AC shareholders, as they’re more likely to set off inventory value beneficial properties in the event that they blow over.
Shortly after that article was revealed, I considered what I had written. Whereas I believed that I had accurately recognized the corporate’s three main danger elements, I felt I hadn’t emphasised their severity. A few of these danger elements had been extra severe than others. For instance, the continued CAPEX improve, whereas a danger to near-term efficiency, is definitely a long-term constructive. Donald Trump’s tariff insurance policies, nevertheless, are simply plain unhealthy.
When occupied with the article, I spotted {that a} devoted article on the one most severe danger going through Air Canada proper now would make sense, along with the one already written. Accordingly, I’ll spend the remainder of this text outlining what I believe is essentially the most severe danger issue to Air Canada, its shareholders, and even travellers, in the present day.
The Air Canada flight attendant strike
The doable Air Canada flight attendant strike is the most important near-term danger to Air Canada in the present day. Threatening to floor flights nationwide, it might instantly affect the corporate’s income and probably impose prices on it within the type of compensating stranded travellers. If Air Canada’s flight attendants had been to strike — which they may do as quickly as this Saturday — then flights would seemingly be grounded. Laws require that flights have a sure variety of workers on board earlier than they’ll take off, and the lack of flight attendants to the picket strains would place Air Canada planes beneath the required numbers.
The affect might be extreme.
Most clearly, travellers who land halfway by multi-leg journeys on the time when a strike is introduced will most likely not catch their connecting flights. Air Canada should compensate them by paying for a flight on a competing airline, however the disruptions to folks’s journey plans and work engagements would seemingly be cripping.
Secondly, Air Canada itself would seemingly be impacted. The entire grounded flights would result in a lack of income — probably a giant one if it lasted a very long time. Additionally, Air Canada could be required to compensate passengers for flights on competing airways.
The underside line
The underside line on Air Canada’s flight attendant strike risk is that it places each the corporate and the nation at risk. To the nation, grounded flights pose the chance of financial and private disruptions. To the corporate, a strike presents the double whammy of decrease income and elevated prices. In an age when Trumpian commerce wars are already disrupting Canada’s economic system, an Air Canada flight attendant strike will not be what the corporate or the nation wants.
