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U.S. investors warm to AC’s promise

April 21, 2014 – MONTREAL - Air Canada's financial promise is piquing the interest of U.S. institutional investors seeking a way to profit from the turnaround of another North American carrier, according to a New York analyst.


April 21, 2014
By Ross Marowits The Canadian Press

April 21, 2014 – MONTREAL – Air Canada's financial promise is piquing the interest of U.S. institutional investors seeking a way to profit from the turnaround of another North American carrier, according to a New York analyst.

Helane Becker of Cowen and Company is optimistic that Air Canada's drive to cut costs by 15 per cent — which she estimates will net nearly $2 billion in the next few years — will improve earnings and help reduce its share discount compared with U.S. network carriers.

"Even if everything else stays exactly flat, revenues don't grow, you're talking about an awful lot of money that can fall to the bottom line and a stock that can really take off and I think there are a lot of big investors that are looking for new ideas that can invest in Toronto and Canada," she said in an interview after initiating coverage last week.

The long-time WestJet (TSX:WJA) analyst expects Air Canada (TSX:AC.B) will follow the strategy of U.S. carriers by cutting costs, paying down debt and returning capital to shareholders through a dividend or by buying back its shares, starting in late 2015 or early 2016.

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That would propel higher Air Canada's share price, which has undergone a roller-coaster ride in the past two years. After bottoming out at 82 cents in the spring of 2012, it peaked at $9.90 this past January before pulling back by 48 per cent when the loonie fell. The shares have since partially recovered, closing at $7.30 in trading on the Tronto Stock Exchange on Thursday. | READ MORE