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June 18, 2024
Air Canada bounces back
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Air Canada’s solid third-quarter results stem from the ongoing restoration of our extensive network, an improved operational performance, our modern and efficient fleet, as well as leading products and services, and an incredible team of employees,” according to Michael Rousseau, President and Chief Executive Officer of Air Canada. The airline reported an operating margin of 12.1%, its first positive quarterly operating margin since the pandemic began, and operating revenue of $5.322 billion, more than double the third quarter of 2021. Air Canada bounces back.

For perspective on these results, we offer our Canadian airline operating statistics data model.  The model demonstrates the tough environment. The Canadian government stymied air travel recovery by keeping the country closed, especially to the important US market.  As we explained previously, the US market is important to Air Canada. Canada’s air travel market is relatively small and the huge market to the south plays an inordinate role.   

Air Canada’s results, therefore, are all the more impressive.  The recovery has been helped by the airline’s ability to take delivery of its delayed MAX8s.  These aircraft come at the right time, as fuel costs spike. The MAX8 is substantially more fuel efficient than the aircraft they replace. This was noted by Rousseau: “Yields also improved, helping offset higher fuel prices.”

Echoing results we are seeing at other airlines: “Advance ticket sales in the quarter were at 95% of third quarter 2019 levels.” according to Rousseau. 

Air Canada summary results for the third quarter of 2022:

  • Operating capacity, measured by Available Seat Miles (ASMs) more than doubled from the third quarter of 2021. Capacity in the third quarter was 79% of the third quarter of 2019, in line with projections in Air Canada’s second quarter 2022 earnings release, dated August 2, 2022.
  • Passenger revenues of $4.818 billion increased about three times from the third quarter of 2021, representing about 94% of passenger revenues in the third quarter of 2019.
  • Operating revenues of $5.322 billion increased about two-and-a-half times from the third quarter of 2021.
  • Operating expenses of $4.678 billion increased by $2.211 billion from the third quarter of 2021.
  • Cost per available seat mile (CASM) decreased to 18.3 cents from the third quarter of 2021 CASM of 22.2 cents, a sequential decrease from CASM of 20.8 cents in the second quarter of 2022. 
  • Adjusted cost per available seat mile (Adjusted CASM)* of 11.6 cents compared to the third quarter 2021 adjusted CASM of 18.7 cents, a sequential decrease from Adjusted CASM of 13.1 cents in the second quarter of 2022. Compared to the third quarter of 2019, Adjusted CASM increased by 14.8%.
  • Operating income of $644 million compared to an operating loss of $364 million in the third quarter of 2021, the first quarterly operating income since the pandemic began.
  • EBITDA (excluding special items) or earnings before interest, taxes, depreciation, and amortization of $1.057 billion, better than the negative EBITDA of $67 million in the third quarter of 2021.
  • Net loss of $508 million (or $1.42 per diluted share), compared to a net loss of $640 million (or $1.79 per diluted share) in the third quarter of 2021. Third quarter 2022 net loss included a foreign exchange loss of $951 million.
  • Net cash flows from operations of $290 million compared to net cash flows from operations of $305 million in the third quarter of 2021.

Air Canada’s 4Q outlook summary:

For the fourth quarter of 2022, Air Canada plans to increase its ASM capacity by about 60% from the same quarter in 2021 (or approximately 85 percent of the fourth quarter of 2019 ASM capacity). 

This capacity increase can be demonstrated in the chart below, which lists new deliveries through October 27.  Capacity growth is MAX8-focused.  Air Canada will deploy MAX8s as fast as Boeing can deliver them.  Note also the A220-300 deliveries have been slow, and the airline has just increased its fleet plans with another 15 ordered.  These two models will be used extensively within Canada.  But both offer effective economics to attract traffic from the US to connect to Air Canada’s international routes across the Pacific and Atlantic.

Air Canada is now providing the following guidance for the full year 2022:

  • Air Canada expects to have increased its full-year 2022 ASM capacity by about 148% from 2021 ASM levels (or about 73% of 2019 ASM levels). Air Canada will continue to adjust capacity and take other measures as required, including accounting for passenger demand.
  • For 2022, Air Canada expects Adjusted CASM to be about 16 to 18% above 2019 levels.  The variance to prior guidance is mainly due to an increase in wages, salaries, and benefits, costs related to a higher number of passengers carried versus prior expectations (which translates into higher passenger service and distribution costs per ASM), as well as the impact of the weakening of the Canadian dollar.?
  • For 2022, Air Canada maintains its expectation of an annual EBITDA margin* of about 8 to 11%.

Major Assumptions

Full-year assumptions were made by Air Canada in preparing and making forward-looking statements. Among these, Air Canada assumes moderate Canadian GDP growth for 2022. Air Canada also assumes that the Canadian dollar will trade, on average, at C$1.30 per U.S. dollar for the full year 2022 and that the price of jet fuel will average C$1.33 per liter for the full year 2022.

author avatar
Addison Schonland
Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

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