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What Air Canada’s Bailout Means for Investors

Air Canada (TSX:AC) suffered because of the COVID-19 pandemic, however, shares have recently soared and have been a popular option for investors. Since March 2020, stock prices have doubled and investors are very optimistic about the future of Canada’s largest airline.

Air Canada acquired a bailout deal (a relief package) worth $5.9 billion that comes with specific stipulations. This deal includes both equity financing and low-interest loans, making it a huge win for Air Canada. However, there are conditions attached to the deal that requires the company to resume regional routes, refund tickets, keep its aircraft orders, and ensure job protection.

The federal government acquired a stake in Air Canada, after bailing out the company and investing about $500 million. Accordingly, the company will be issuing more than 21 million shares.

Government bailout was crucial for Air Canada’s survival

The company is facing a lot of uncertainty, however, this bailout was crucial to its survival. The relief package, provided by the federal government, will boat liquidity position. Furthermore, low-interest loans and equity investment will de-risk the balance sheet, which is great news for investors.

Passenger aeroplane of Air Canada on airport
Since March 2020, stock prices have doubled and investors are very optimistic about the future of Canada’s largest airline.

Factors such as share dilution, equity financing, and jet fuel pricing, can impact a company’s chances of experiencing profitable growth. Although there have been fluctuations in the past week or so, investors can view these fluctuations as good buying opportunities. Air Canada is a top buy for people who are optimistic regarding a surge in demand for air travel once the government lifts the pandemic-related restrictions.

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