Notwithstanding “unprecedented challenges” faced by the air transportation system that forced it to reduce capacity in July and August, Air Canada plans for a further ramp-up of capacity in the third quarter. The carrier wants to grow capacity in available seat miles (ASM) by 131 percent over Q3 last year, although this is still only 79 percent of its 2019 level. Air Canada prepares for further ramp-up despite challenges.
Air Canada reported its Q2 results last week. The net loss was $-386 million, an improvement over last year’s $-1.165 billion. The operating loss was $-253 million compared to $-1.133 billion, but EBITDA excluding special items was positive at $154 million versus $-656 million in the same quarter last year. Operating expenses were up to $4.234 billion from $1.970 billion, with fuel costs up to $1.450 billion from $239 million.
The HY1 results were: net loss $-1.360 billion (2021: $-2.469 billion), operating loss $-803 million ($-2.182 billion), EBITDA $11 million ($-1.419 billion), total revenues $6.554 billion (1.566 billion). Free cash flow was $441 million compared to $1.638 billion in Q2 2021. The carrier was able to reduce it Q1 losses compared to 2021.
The carrier grew total revenues in Q2 to $3.981 billion from $837 million in Q2 2021. Of which $3.441 billion from passengers and $241 million from cargo versus $53 million. This reflects the huge increase in traffic since the Canadian government further eased travel restrictions during the quarter. Although most restrictions within the country have been lifted, travelers entering Canada still have to present evidence that they are fully vaccinated.
The effect was almost five times higher ASMs and total capacity of 73 percent. Although Air Canada had 90 percent of its staff available, ramping up so fast has been quite a challenge, CEO Michael Rousseau said: “We have gone from a near two-year shutdown of air travel to rebuilding our capacity back to close to 80 percent of 2019 levels in just a few months. Despite meticulous planning and projecting, participants involved in the air transport system are facing significant pressure in restarting. We continue to work together to restore the travel experience to expectations and are encouraged by recent improvements.”
Eight percent capacity reduction in July/August
In response to the problems it experienced in June, Air Canada decided to cut back capacity in July and August by eight percent, or 154 daily flights to ease the pressure. Affected flights are mostly domestic and transborder services from Toronto and Montreal to the US. But from September, capacity will be ramped up again to 79 percent over 2019. Full-year capacity should be 150 percent higher year on year, or on average 74 percent of pre-Covid levels, but this could be adjusted if necessary.
Air Canada ended June with $10.5 billion in unrestricted liquidity and net debt of $7.0 billion. The airline expects to improve its full-year EBITDA margin from four percent in Q2 to between eight and eleven percent. Adjusted costs per available seat mile (CASM) depend on passengers carried but are guided at fifteen to nineteen percent up from 2019.
Air Canada grew its fleet from 175 to 189 aircraft, notably by the introduction of three converted Boeing 767-300ERF freighters, the delivery of eight MAX 8s, and three Airbus A220-300s. Seven 777-300ERs and four A330-300s were reconfigured from freighters into passenger aircraft again. The airline placed an order for two new 777Fs for delivery in 2024. Fleet numbers at Air Canada Rouge were static at 39 narrowbodies, while Air Canada Express reduced the fleet by nine aircraft to 114 as it phased out the De Havilland Canada Dash 8-300.
