Business & Investment

Vaccine Effectiveness Decline: Will Air Canada (TSX: AC) Shares Fall to $ 15?

Air Canada (TSX: AC) Inventories have fallen by almost 10% year-to-date as the second wave of mutant coronaviruses has re-imposed restrictions on air travel in Canada, the United States, and Europe. The three regions are AC’s main operating markets. In November 2020, AC stocks surged by more than 80% as investors wanted the vaccine to end travel restrictions. But what they didn’t consider was a mutation in the virus.

One question that all travelers, airlines, investors, and governments are asking is the time to the end of the pandemic.

Three variants of the mutant coronavirus have been found in Brazil, South Africa, and the United Kingdom. The only way to stop the infection is to wear a mask and stay at a social distance until a sufficient number of people have been vaccinated.

Knowing the risk of viral mutations, the government has no choice but to impose travel restrictions until the public is vaccinated. Prime Minister Justin Trudeau said the government would make the vaccine available to everyone by September. If the government cannot control the spread of the mutant virus, it will return to the March 2020 scenario, where the vaccine will be less effective.

Therefore, travel restrictions may be enforced until the end of summer. Don’t be surprised if there is another national blockade.

Vaccine efficacy has already begun to decline with Air Canada strains

When the pandemic first occurred in March 2020, AC stocks fell more than 70% to $ 12.15, trading at about $ 15 most of the blockade time.Stock price soared to $ 27.5 Vaccine news.. But now, mutant viruses are already beginning to show their effects on AC stock. Vaccine effectiveness is waning, with AC inventories declining by 27.5% from pandemic highs.

The Government of Canada is discouraging non-essential overseas travel at all possible costs.effective January 7Only those who test negative on the COVID-19 test, which was conducted 48 hours before the trip, can enter Canada. In addition, they must remain quarantined for 14 days. The Canada Revenue Agency (CRA) does not provide recovery benefits to people in quarantine for overseas travel.

These limits have proven valid, as Canadian airlines have canceled at least 50,000 flight reservations. AC had no choice but to reduce more work and cancel more routes. Justin Trudeau warned about more travel restrictions.

As the cycle repeats, AC stocks fall to $ 15 again.

Only Bailout Vaccines Can Save Air Canada

The airline bears a fixed cost to keep those planes flying. AC planes haven’t seen the sky for almost 10 months. This is the responsibility as it is only burning cash. I am paying 9% interest on this cash.

What AC needs now is free cash to float. Bailout offers AC a low interest rate mortgage to reduce the pain of cash burning. The government has been negotiating relief with airlines since November 2020, but no results have been achieved.

Bailout is subject to conditions such as resuming interrupted routes, refunding ticket prices, and reducing carbon dioxide emissions. That doesn’t mean AC stocks won’t go up. Relief and relaxation of travel restrictions will surge due to stagnant demand. But until then, liquidity is needed.

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Stupid contributor Puja Tayal There are no positions in any of the listed stocks.

Vaccine Effectiveness Decline: Will Air Canada (TSX: AC) Shares Fall to $ 15?

https://www.fool.ca/2021/01/28/vaccine-effect-fades-will-air-canada-tsxac-stock-dip-to-15/ Vaccine Effectiveness Decline: Will Air Canada (TSX: AC) Shares Fall to $ 15?

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