A330 300 4 scaled
Canada’s largest airline announced its first-quarter earnings.
The key data points are:
- Total operating revenues of $5.2 billion increased 7% year over year
- Operating income of $11 million and adjusted EBITDA of $453 million
- Double-digit on-time arrivals improvement from the first quarter of 2023
- Leverage ratio of 0.9 as of March 31, 2024
- Reiterating 2024 guidance for capacity, adjusted CASM, and adjusted EBITDA
In February, the airline raised its guidance based on robust international demand. However, it should be noted that Air Canada falls under the influence of the US airline industry and that industry has seen sharp increases in labor costs.
As noted in the results, operating expenses of $5.2 billion increased 6%. The increase was due to higher costs in nearly all line items, reflecting higher operated capacity and traffic year over year and higher labor, maintenance, and information technology expenses. Lower fuel expenses partially offset the increase.
This delivered a net loss of $81 million compared to a net income of $4 million last year. Adjusted net loss is $96 million compared to adjusted net loss of $188 million.
Air Canada is arranging leases for more 737 MAX 8s scheduled for delivery in 2024. Upon reconfiguration completion, they will enter service in 2025. This drive should benefit the airline’s fuel costs. For the 2Q24, Air Canada plans to increase its ASM capacity by ~7% from 2Q23.
In summary, the airline’s results are below analysts’ expectations. Canadians’ appetite for post-pandemic travel waned as a 21% YoY rise in labor costs hit. Winter is the slowest period for all North American carriers. Any fuel spike will negatively impact and will add to higher industry labor costs.
