BTG1
January 29, 2003, 11:17 AM
Business Story
Air Canada shares fall in wake of report
Analyst says airline's operating structure is 'unsustainable'
NICOLAS VAN PRAET
The Gazette
Wednesday, January 29, 2003
ADVERTISEMENT
Air Canada shares tumbled to their lowest level in more than a year yesterday as UBS Warburg brokerage called the airline's operating structure "unsustainable."
The company's stock bottomed out at $3.31 during trading in Toronto before regaining some ground. It closed at $3.70.
The shares have not been valued that low since Nov. 8, 2001, in the fallout of the terrorist attacks on the U.S.
When Air Canada loses money, working Quebecers lose money. Air Canada's largest shareholder is the Caisse de dépôt et placement du Québec, which invests Quebecers' contributions to public pension and insurance plans.
UBS analyst Fadi Chamoun said in a research note yesterday that Air Canada's current operating structure is unsustainable.
"With a recovery of business-travel spending nowhere in sight and a potential for a Middle East conflict that could be devastating for the industry, the light at the end of the tunnel is very dim."
The company needs to find a way to gain operational and financial flexibility, he said.
"We believe that this will require cost-cutting in the form of capacity reductions and layoffs, as well as new funding."
UBS doubled its 2002 loss estimate for Air Canada, predicting the airline will lose $1.49 per share. The brokerage said 2003 will be even worse. It estimates Air Canada will lose $1.90 per share this year.
Ross Healy, president of Strategic Analysis Corp., which manages the funds of 130 clients, said he expects an eventual "panic" selloff of Air Canada stock.
American analysts appear more positive about the company. Merrill Lynch analyst Michael Linenberg yesterday repeated his "buy" rating on Air Canada shares. He said he expects the airline will turn itself around financially before its U.S. competitors do.
Air Canada is saddled with debt and obligations totalling about $12 billion.
It faces a range of challenges, including fierce competition in Canada from low-cost carriers, a growing unfunded pension liability, the disappearance of its high-paying business customers and the potential impact of a war in the Middle East.
In a speech last fall, Air Canada chief executive Robert Milton said investors are still overlooking the progress Air Canada is making in improving its business.
The airline's share price has not recovered since hitting a high of $21.50 in May 2000.
© Copyright 2003 Montreal Gazette
:windsocd:
Air Canada shares fall in wake of report
Analyst says airline's operating structure is 'unsustainable'
NICOLAS VAN PRAET
The Gazette
Wednesday, January 29, 2003
ADVERTISEMENT
Air Canada shares tumbled to their lowest level in more than a year yesterday as UBS Warburg brokerage called the airline's operating structure "unsustainable."
The company's stock bottomed out at $3.31 during trading in Toronto before regaining some ground. It closed at $3.70.
The shares have not been valued that low since Nov. 8, 2001, in the fallout of the terrorist attacks on the U.S.
When Air Canada loses money, working Quebecers lose money. Air Canada's largest shareholder is the Caisse de dépôt et placement du Québec, which invests Quebecers' contributions to public pension and insurance plans.
UBS analyst Fadi Chamoun said in a research note yesterday that Air Canada's current operating structure is unsustainable.
"With a recovery of business-travel spending nowhere in sight and a potential for a Middle East conflict that could be devastating for the industry, the light at the end of the tunnel is very dim."
The company needs to find a way to gain operational and financial flexibility, he said.
"We believe that this will require cost-cutting in the form of capacity reductions and layoffs, as well as new funding."
UBS doubled its 2002 loss estimate for Air Canada, predicting the airline will lose $1.49 per share. The brokerage said 2003 will be even worse. It estimates Air Canada will lose $1.90 per share this year.
Ross Healy, president of Strategic Analysis Corp., which manages the funds of 130 clients, said he expects an eventual "panic" selloff of Air Canada stock.
American analysts appear more positive about the company. Merrill Lynch analyst Michael Linenberg yesterday repeated his "buy" rating on Air Canada shares. He said he expects the airline will turn itself around financially before its U.S. competitors do.
Air Canada is saddled with debt and obligations totalling about $12 billion.
It faces a range of challenges, including fierce competition in Canada from low-cost carriers, a growing unfunded pension liability, the disappearance of its high-paying business customers and the potential impact of a war in the Middle East.
In a speech last fall, Air Canada chief executive Robert Milton said investors are still overlooking the progress Air Canada is making in improving its business.
The airline's share price has not recovered since hitting a high of $21.50 in May 2000.
© Copyright 2003 Montreal Gazette
:windsocd: