Air Canada Reports Record Full Year Operating Revenues

Air Canada released its 4th quarter and full year 2023 financial results. The airline had very strong results, achieving record full year operating revenues of $21.833 billion, full year operating income of $2.279 billion, 2023 adjusted EBITDA of $3.982 billion, 2023 cash from operating activities of $4.320 billion and free cash flow of $2.76 billion. The company also reduced its leverage ratio to 1.1 as of December 31, 2023, down from 5.1 at year end 2022.“For the full year, we had record operating revenues of $21.8 billion, up 32 per cent from 2022 as demand for air travel remained strong. Annual operating income was $2.3 billion, a $2.5 billion improvement from the previous year. Our adjusted EBITDA was nearly $4 billion, more than twice that of fully yer 2022. These results stem from the effective management, hard work and customer centric approach of everyone at Air Canada. I thank the entire team for their dedication as we safely transported more than 46 million passengers in 2023. The focus on operational improvement was evident as, even with the growth in traffic and ongoing supply chain challenges, our key operational metrics and customer satisfaction improved year over year,” said Michael Rousseau, President and Chief Executive Officer of Air Canada. We also took important steps during the year to enable ourselves to continue performing consistently as we remain firmly committed to our plan and to enhancing our level of customer service, improving our operational reliability, strategically adding to our key hubs and network and growing profitably. We strengthened our balance sheet, reduced our debt and, despite the continuing macroeconomic and structural cost pressures on our industry, our unit costs were contained within our adjusted CASM guidance. Additionally, we will continue to expand Aeroplan, a key driver of customer loyalty that has doubled its membership to eight million members over the last five years. Nonetheless, the company plan to boost capacity 6-8% in 2024 was below analyst’s expectations of a 10% capacity increase. “This is reasonable for us as we continue to see industry supply chain pressures and other constraining factors,” said head of network planning Mark Galardo. Those pressures may include production delays at Boeing and Airbus, with at least one Air Canada plane scheduled for delivery this year already pushed back to 2025. This means the company won’t exceed pre-pandemic capacity until 2025, five years after the pandemic started. Short-term demand remains steady, with advance bookings up six percent year over year in the fourth quarter. The company earned nearly 10% higher year-over-year profits as it focused on containing industry cost increases. Growth in Atlantic and Pacific international traffic grew 12% year over year in the fourth quarter from both more flights and higher fares. Looking forward, a new pilot agreement for its 4,500 pilots is currently being negotiated, the impact of which remains unknown. Management provided guidance of a 2.5%-4.5% increase in CASM for 2024, a wide range that will be impacted by the labor agreement. Competition is growing, particularly from Porter Airlines, which has transitioned from turboprops to jets in its latest growth strategy. The Bottom LineAir Canada had stronger financial performance 2023, and is poised to continue that success in 2024. The major outstanding questions regarding labor contracts and capacity growth will influence performance this year and shape expectations for 2025 and beyond.

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