Air Canada posted a profit of C$410 million ($298 million) during the second quarter, a decline of more than 50% from the same period last year, as costs rose and load factor as well as yields declined in an ever-tougher international market.
Adjusted for foreign exchange gains and other financial instruments, however, the Montreal-based company said on 7 August that it notched a profit of C$369 million, down from C$664 million during the same three months of last year.
Revenue during the three-month period rose slightly year on year, to C$5.5 billion, while expenses rose 9% year on year to C$5.1 billion. A 12% year on year rise in fuel costs due to more activity as well as a higher per-litre price led those expenses. Wages and maintenance costs also climbed.
“Our results were solid… but did not achieve internal expectations,” chief executive Michael Rousseau says.
“We saw healthy demand, with load factors remaining above historical averages. We remained sharply focused on our customers and operations throughout the quarter and experienced a 10-percentage point year-over-year improvement in our on-time performance, even with the increased flying.”
“We will continue to adapt to market conditions, manage capacity proactively and contain costs through productivity and other initiatives,” he adds.
Air Canada’s second-quarter load factor fell more than two percentage points year on year to 85.7%, while its capacity as measured in available seat miles rose 6.5% from one year earlier.
NORTH ATLANTIC COMPETITION
Domestic revenue as well as US transborder revenue each rose 4% year on year in the second quarter, while international revenue was mixed – falling in Europe by 6% and rising in Asia and the Pacific by 22%, year on year.
Mark Galardo, Air Canada’s executive vice-president for network planning and revenue management, says the airline’s North Atlantic summer season was plagued by reduced load factors and yields, increased international competition, and overcapacity. In addition, the Euro 2024 soccer championship in Germany in June and the Summer Olympic Games in Paris contributed to the declines.
“Leisure travel to the Mediterranean – to Italy, Greece, Portugal, the south of France – remains strong, about 5-6% better year over year,” Galardo says. “What we saw in particular in core Europe, meaning France and Germany, where there is a significant point-of-sale component, was quite weak.”
“Supply over the North Atlantic was larger than the demand increase,” he adds.
Air Canada expects a rebound in September and October, with November and December too early to call, he says.
“In particular, demand to the Mediterranean really held up and we will be looking to do a bit more of that 2025,” Galardo says.
Last month Air Canada lowered its full-year earnings expectations, which it confirmed on 7 August.
The airline expects adjusted earnings before interest tax, depreciation and amortisation (EBITDA) to be between C$3.1 billion and C$3.4 billion for the full year. That is down from a previous guidance range of C$3.7 billion to C$4.2 billion.
During the second quarter, its adjusted EBITDA fell to C$914 million from C$1.2 billion last year.
FLEET ADDITIONS
On 30 June, the carrier had 356 aircraft in its fleet, up by two from the same time last year.
In June, Air Canada entered into lease agreements covering eight additional Boeing 737 Max 8s, of which one has already been delivered and another five are expected to join the fleet later this year. The final two are scheduled for delivery in 2025. All eight aircraft are scheduled to enter service in 2025, after having completed reconfiguration and other modification requirements.
In the next five years, the carrier expects 90 aircraft will join its fleet. That figure includes 19 787 Dreamliners, 39 Airbus A321XLRs and 27 A220s.
