Air Canada's profits fell by half while revenues rose, highlighting ongoing challenges in post-pandemic recovery
Air Canada experienced a significant drop in profits, despite an increase in revenues in its latest quarter, as the airline faced challenges in finalizing its recovery from COVID-19, as reported by BNN Bloomberg.
CEO Michael Rousseau addressed analysts on a conference call, highlighting that the second-quarter results, though solid, fell short of internal expectations.
Higher capacity and strong demand for Mediterranean vacations contributed to a two percent year-over-year revenue increase, reaching $5.52bn for the quarter ending June 30.
However, revenue-per-seat figures declined compared to the previous year, where post-pandemic demand and lower capacity across the industry allowed for higher fares, fuller planes, and wider profit margins.
Air Canada’s net income in the second quarter decreased by 51 percent year-over-year, amounting to $410m. Chief Financial Officer John Di Bert noted that operating expenses rose by nine percent from the previous year, driven by increased costs of jet fuel and labour.
Despite an increased number of routes, Air Canada’s recovery from the pandemic remains incomplete four and a half years after borders closed and lockdowns began. Di Bert stated, “We’re still not back to 2019 levels in terms of scale and the size of the airline.”
The airline's adjusted earnings in the second quarter of 2019 were slightly higher than those five years later. The fleet size also decreased, with 356 aircraft as of June 30, compared to 400 in the second quarter of 2019, although many retired planes were smaller, older, and less efficient.
Last Friday, the company’s share price dropped to $14.90, a closing low not seen since October 2020.
Rousseau expressed disappointment with the stock performance, stating, “Like our shareholders, we’re disappointed with our stock price performance here... especially coming off our record 2023 and having completely repaired the balance sheet. We also know that most global airline stocks are having similar challenges.”
Executives previously indicated that corporate travel would boost profits in 2024, despite persistent habits of video conferencing and remote work. Premium products, including business cabin and premium economy fares, accounted for 30 percent of passenger revenue growth in the first quarter.
Mark Galardo, head of revenue and network planning, noted continued momentum, particularly in Canada-US travel, though still 25 to 30 percent below 2019 levels.
On an adjusted basis, Air Canada earned 98 cents per diluted share, down from $1.85 per diluted share in the same quarter a year ago.
This result surpassed analysts’ expectations of 92 cents per diluted share but followed the company’s reduction of its 2024 financial forecast due to lower-than-expected plane occupancy and tough competition in international markets.
Looking ahead, Air Canada plans to increase its flight capacity by four to 4.5 percent in the third quarter compared to the same period in 2023.
