Even while rising costs dampened net earnings, Air Canada said that first-quarter revenue nearly doubled compared to a year earlier as travellers climbed back on aeroplanes in mass.
After 11 consecutive quarterly losses totaling $10.1 billion, the carrier finally earned a profit in the second quarter of 2018 thanks to record sales of $4.9 billion.
In comparison to last year’s $974 million in losses, this year’s net income of $4 million is a huge improvement.
Results for the three months ending March 31 surpassed all expectations for a normally weaker quarter, according to CEO Michael Rousseau, who also anticipates continued high demand thanks to robust advance reservations for the remainder of the year. At the end of March, they reached $5.3 billion, up from $4.1 billion in the same month a year earlier.
“North America, and Canada in particular, can provide significant difficulties during the winter and early spring. Rousseau told analysts on a conference call on Friday that large visitor volumes, especially around the spring break season, typically accompany inclement weather.
Air Canada’s sustained profits over the past half-year hint at a return to stability for an industry devastated by the COVID-19 pandemic, when lockdowns, border closures, and travel restrictions tanked demand. This is despite an uncertain economic outlook and the carrier’s on-time arrival rate of 57% in March, compared to 70% in March 2019.
The load factor for the airline increased to 85% from 65% year-over-year in the most recent quarter.
The airline’s vacation package division, Air Canada Vacations, achieved “remarkable results,” according to the CEO.
Even though cargo income fell by 40% year-over-year, the company added five more cargo jets to its fleet than it did the year before. As China reopened and e-commerce and consumer demand decreased, only four of those freighters were in use, and other planes that had briefly changed to cargo shipping resumed to passenger trips.
On his last day of work as CFO on June 30, Amos Kazzaz said, “the cost world is different” than it was before 2020, when prices for everything from aeroplane cuisine to ground handlers were lower.
In 2019, the last full year unaffected by COVID-19, Air Canada posted a profit of $345 million during the first quarter, compared to a profit of $4 million in 2019. The price of jet fuel has increased by 30 percent over the past year, and maintenance and personnel costs have also gone up, contributing to the rise in costs.
Despite paying off $500 million of its $6.5 billion in net debt, Air Canada’s interest expense increased by 17 percent year over year to $245 million due to rising rates.
The airline’s net debt ratio was 3.2 times at the end of the quarter, down from 5.1 times at the end of 2022, which is faster than analysts had predicted.
Because current jet fuel prices are lower than predicted, Air Canada increased its financial outlook for the year last week. The Montreal firm has increased its forecast for adjusted earnings to $3.5 billion to $4 billion, up from $2.5 billion to $3 billion.
The higher ticket prices are also beneficial. Despite fierce competition from budget carriers for sun destinations and some domestic routes, passenger yield (the average amount received per customer flown one mile) increased nine percent year over year.
New ultra-low-cost entrants are likely to exert continuous pressure on yields. According to TD Cowen analyst Helane Becker’s statement to investors, “Air Canada Vacations has outperformed our expectations despite new competitive pressures thanks to a robust international environment and significant ground package revenues.”
Travellers on business are also making a comeback, and they’re bringing their wallets. Mark Galardo, Air Canada’s president of revenue and network planning, said that about 30 percent of the company’s year-over-year revenue growth last quarter came from “premium cabins.”
According to Rousseau, “the strong and improving collaboration between our people and our ecosystem partners has been key to our service delivery during this period,” and this bodes well for the company’s prospects over the summer.
Possibly not potent enough. Air Canada and three other major airlines are members of the National Airlines Council, which on Thursday urged the Canadian government to implement “shared accountability” in the aviation industry. In the future, it would be ideal if everyone involved in the aviation business, from airport personnel to customs agents to air traffic controllers, paid their fair share of the blame and explained why passengers had to be compensated for flight delays and cancellations.
Revenue for the quarter, which was published on Friday, was $4.6 billion, up 90% from the $2.6 billion reported for the same period in 2022.
Adjusted loss per diluted share for the most recent quarter was 53 cents for Air Canada, down from $2.09 in the same period a year ago.
According to Refinitiv, a financial data and analysis business, analysts projected an adjusted loss of 74 cents per share on revenue of $4.35 billion.