Air Canada (TSX:AC) stock was up 0.11% in early afternoon trading on August 24. Shares have climbed 3.4% in 2018. However, it has been a difficult year for airline stocks after a banner 2017. Rising oil and gas prices have raised the spectre of higher fuel costs for airliners. Air Canada and others have benefitted significantly from lower operating costs since the 2014-2015 oil shocks.
Air Canada released its second-quarter results on July 27. The company reported record second quarter operating revenues of $4.33 billion and record unrestricted liquidity of $5.06 billion. However, adjusted pre-tax income did drop to $163 million compared to $229 million in the prior year.
The company was forced to revise its 2018 full-year guidance due to rising fuel costs. Leadership is confident that this development will result in a short-term setback. Air Canada was also pleased to announce a joint venture with Air China which makes Air Canada the first North American airline to negotiate such a deal with a Chinese airline.
Air Canada stock has managed to recover from volatile conditions throughout most of the year. The company will still have to contend with high fuel costs for the time being, but economic strength should continue to power passenger traffic and positive revenue growth. The stock is an enticing buy as the broader TSX index appears poised for yet another late-year run. It is still worth noting that we are late in a recovery, and airline stocks are particularly susceptible to economic turbulence.
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