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May 23, 2024
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Air Canada returned to profitability in the final quarter of 2022, producing its first profit since Q4 2019. Although the full year was still loss-making, the carrier more than halved its net loss. The airline is expecting a “solid demand environment in 2023”, to which it responds by expanding the network and fleet. Air Canada should be back at 100 percent capacity in 2024.

In Q4, Air Canada produced C$4.680 billion in revenues compared to C$2.731 billion in 2021 as it carried over ten million passengers, up from 5.8 million. All markets performed well, although domestic business was lagging a bit behind. Transatlantic did very well and contributed 27 percent to all passenger revenues at nearly C$1.1 billion, up sixteen percent over Q4 2019, said Chief Commercial Officer Lucie Guillemette, who will retire after 46 years within the industry. Sun and leisure destinations in Latin and South America were forty percent ahead of 2019, while the Pacific and Australia also recovered favorably. Already in Q3, the airline was bouncing back.

Cargo revenues were 55 percent higher compared to Q4 2019, but full-year were down C$229 million on 2021 at C$1.266 billion. Air Canada Cargo has three converted Boeing 767s in service while all passenger aircraft previously used for freight have been re-configured back for passenger services. By the end of 2024, the cargo fleet will have grown to nine 767s and two 777s. Air Canada and Emirates SkyCargo announced an MoU earlier this month to expand interline cargo options and block space agreements. The MoU is pending regulatory approval.

Operating expenses were higher at C$4.708 billion from C$3.234 billion, of which C$1.459 billion was for fuel. Despite an operating loss of C$-28 million versus C$-503 million, Adjusted EBITDA turned positive at C$389 million versus C$22 million. The net profit for the quarter was C$168 million compared to a C$-493 million loss the year before. Solid demand and yields of eighteen percent better were most helpful, as was the growing participation in the Aeroplan loyalty program.

Full-year results

Full-year, revenues totaled C$16.556 billion, up from C$5.4 billion. The operating loss was C$-187 million versus C$-3.049 billion in the “extremely challenging” 2021. Adjusted EBITDA was C$1.457 billion compared to C$-1.464 billion, with an EBITDA margin of 8.8 percent. Operating expenses totaled C$16.7 billion, up from C$9.4 billion the year before. The net loss was down to CS-1.7 billion from C$-3.602 billion. Air Canada carried 36.1 million passengers, thanks to the rebound of traffic since last spring when Canada fully re-opened.

The airline has taken a prudent approach to add capacity. It has built back its workforce to 35.874 by the end of December, which is more the pre-pandemic to support less flying. Staffing levels for this year are on plan. More operational resilience was built in by setting aside fifteen aircraft for support and recovery. Extreme winter weather hit during the December peak, which affected network operations and resulted in canceled flights. EVO of Operations, Craig Landry, was happy that Air Canada continued even when other airlines elsewhere suffered from the weather. The flight completion rate for Q4 was over 95 percent.

Capacity to recover to ninety percent

This Q1, Air Canada plans to operate at 84 percent of 2019 levels and reach ninety percent for the full year. It has seen strong ticket sales in Q4 at 102 percent of pre-pandemic levels on less capacity. Forward bookings are strong across all cabin products, which gives the airline confidence to continue rebuilding international capacity. A new route was recently launched to Bangkok, the only non-stop route between North America and Thailand, while Japan and Korea are also showing demand. Air Canada will also build its partnership with United Airlines, which already has proven to be beneficial.

On the fleet, Air Canada says that it has taken delivery of all forty Boeing MAX on order and had 32 Airbus A220s by the end of December, with a 33rd joining in January. The airline recently announced a follow-on order for fifteen more A220s to bring its order book to sixty. Of the remaining 27 to be delivered, it is expecting six in 2024, six in 2025, and fifteen in 2026. It also has thirty Airbus A321XLRs on order that will complete the renewal of the narrowbody fleet. The widebody fleet will grow by three 787s, but deliveries have slipped to spring and summer this year and the last in 2024. The Air Canada and Rouge fleet counted 371 aircraft by the end of December plus 154 regional aircraft.

Liquidity stood at more than C$9.8 billion in December, while net debt stood at C$7.5 billion. The net debt ratio will be higher in 2024 as the airline is expecting higher capital expenditures, including those for freighter aircraft. The EBITDA margin range for 2024 is between C$3.5 and C$4.0 billion, in line with what it said on its 2022 Investor’s Day. Capacity should fully recover to pre-pandemic levels.

author avatar
Richard Schuurman
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016. Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.

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