Air Canada lost C$81 million in the first quarter as costs rose | News

Air Canada lost C$81 million ($59 million) in the first quarter of 2024 as higher costs related to increased capacity and lower freight revenue weighed on the company.

But excluding interest, taxes, depreciation and amortization (EBITDA), the company earned C$453 million, slightly more than in 2023, the airline reported on May 2.

“Air Canada’s solid first quarter results position our airline for strong performance in 2024,” said CEO Michael Rousseau. “As we look into the summer, we see a continued healthy demand environment.”

Air Canada’s revenue rose 7% year-over-year to C$5.2 billion in the quarter ended March 31, while capacity rose 11% in one year. Passenger revenues rose 9%, supported by higher traffic, particularly in the Pacific and Atlantic markets. However, freight revenues fell by 9%.

The airline’s costs rose 6% to C$5.2 billion in the first quarter, due to costs related to capacity increases and an increase in labor, maintenance and IT costs. But a drop in fuel prices of almost 20% ‘partially’ offset these increases.

“Demand continues to trend favorably,” said Mark Galardo, the airline’s executive vice president of network planning and revenue management. Business travel is returning and the airline has seen “encouraging signs” for the segment, expecting a 10 to 20% year-on-year increase in the second quarter.

FLEET

Air Canada, including sister airline Air Canada Rouge, ended the first quarter with 248 aircraft, five more than at the end of 2023. It had 118 aircraft operated on behalf of Air Canada by regional airlines under the Air Canada Express brand.

Executives say they are “in the process” of adding more leased Boeing 737 Max 8s to the fleet. These would be delivered in 2024 and put into service in 2025 after being reconfigured, says chief financial officer John Di Bert. The airline expects to announce such a deal soon.

“We remain focused on having the right fleet in the right place to capitalize on our opportunities,” he says.

The incoming leased aircraft will help alleviate potential pressure related to the recall of the Pratt & Whitney PW1000G engines, CEO Rousseau added.

“We do see opportunities to add more capacity at profitable margins,” he says. “There is a strong business case to bring these aircraft into our fleet and do some reconfiguration… It is also defensive to some extent because we have challenges with the Airbus A220 engines.”

Air Canada currently has “six or seven aircraft on the ground” due to the engine recalls, he said, adding that the airline will “discuss compensation with Pratt.” According to Cirium’s fleet data, the airline has 24 A220s in service and 27 more on order with Airbus.

“We are now incurring the costs, and those costs are currently included in our figures. Hopefully we can get some of that back in the not too distant future,” says Rousseau.

For the full year, the company expects capacity, measured in available seat miles, to increase 6-8%, with adjusted EBITDA between C$3.7 billion and C$4.2 billion.

“We are confident that we can achieve our expectations for the whole of 2024,” says Rousseau.