Air Canada's Guidance Suspension Leaves Analysts Unconcerned

(Bloomberg) -- Air Canada suspending all financial guidance for 2019 in the wake of Boeing 737 Max grounding has yet to rattle analysts in their first take.

Shares of the Montreal-based carrier have pared much of their earlier 2.9 percent decline, and BMO thinks the event is a short-term issue. Peer WestJet Airlines Ltd. fell as much as 2.1 percent intraday.

“We believe lower capacity drives unit costs higher in the short term while the ability to improve yields is usually delayed and as such we continue to see this as a short term issue and would buy on weakness,” BMO analyst Fadi Chamoun told clients in a note Friday.

A similar tone was echoed at RBC, which isn’t altering its long-term view on Air Canada’s stock. The company’s choice to suspend guidance “does not come as unexpected and more importantly, we do not consider it to be impacting our longer-term view on the shares.” RBC reminds investors Air Canada isn’t altering its 2019-2021 targets, and sees the interruptions from the 737 grounding as a “temporary, one-off issue.”

Air Canada maintaining its cumulative free cash flow guidance of C$4 billion to C$4.5 billion by 2021 is also a positive element, analyst Walter Spracklin tells clients in a note. The company is set to report first-quarter earnings May 6.

--With assistance from Aoyon Ashraf.

To contact the reporter on this story: Michael Bellusci in Toronto at mbellusci2@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Brad Olesen, Richard Richtmyer

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