Q2 profits take flight on record passenger traffic

Increased passenger traffic and lower operating costs are driving profitability at Canadian airlines, with Air Canada and WestJet both posting robust second-quarter profits that blew past expectations.

With the launch of 16 international and U.S. routes in the second quarter, Canada’s largest airline reported robust traffic growth of 13.6 per cent, driving passenger revenues up by 11.9 per cent to $3.52 billion. On June 29, Air Canada flew nearly 167,000 passengers, setting an all-time record that chief executive Calin Rovinescu expects will be surpassed over the upcoming August long-weekend.

“We have increasing confidence that our business plan can indeed deliver what we indeed expect it to, regardless of fuel prices, foreign exchange or other extraneous factors,” Rovinescu said in a conference call Tuesday. “Demand continues to be robust in a stable fuel and pricing environment as we move into what has historically been our most important quarter, given the travel demands and patterns of our North American customers.”

Air Canada’s net income reached $300 million, or $1.08 per diluted share, in the three month period ending June 30, an increase from $186 million, or $0.66 per diluted share, from the same time in 2016. Adjusted net income was $215 million, or $0.78 per share, almost double the already-elevated average analyst consensus of $0.38, according to Bloomberg.

Air Canada issued a press release in early July that it had set a record for passengers flown in one day, and that its earnings before interest, taxes, depreciation, amortization, impairment and aircraft rent (EBITDAR) would “significantly exceed” analyst expectations of $475 million. The company’s EBITDAR came in at $670 million, surpassing last year’s record second-quarter results of $605 million.

In a note to clients, RBC Capital Markets analyst Walter Spracklin called the results “significantly better than ‘significantly better’."

“The company exceed expectations that were already revised higher on Q2 ...”