The pandemic has hit the airline industry hard over the past few years. And even when things looked like they should be recovering in 2022, the industry still faced challenges this year as inflation has impacted consumer spending and inflated oil prices have also made it difficult for airlines to post profits.
Shares of Air Canada (TSX:AC) are down a relatively modest 9% this year but since 2020, they have cratered an incredible 60%. During that same stretch, the TSX has risen 14%. And when looking at the airline's financials, it's easy to see why investors haven't been terribly bullish on it. After posting a profit of $1.5 billion in 2019, Air Canada incurred losses of $4.6 billion (2020) and $3.6 billion (2021) in the following years. And this year, it's headed for another multi-billion-dollar loss as well.
Things are, however, improving, with Air Canada's net loss of $508 million for the period ending Sept. 30 being an improvement from the $640 million loss it posted in the prior-year period. And operating revenue of $5.3 billion was more than double the $2.1 billion that the company reported a year earlier. Plus, oil prices have been coming down in recent months, and that can mean a stronger bottom line next year if that trend continues.
Trading at a forward price-to-earnings multiple of 19, Air Canada's stock is modestly priced and it could make for a good buy next year. The International Air Transport Association projects that next year the industry will be profitable again – which would bode well for Air Canada's stock.
