‘Very challenging’ quarter
Air Canada loss narrows as revenue jumps fivefold
Montreal-based Air Canada reported a narrower operating loss of $253 million in the second quarter of 2022, as operating revenue climbed more than fivefold over the same period a year ago.
The improved results came as travel returns to pre-pandemic levels, but the quarter wasn’t without its challenges. Here’s what you need to know.
BACKSTORY
Air Canada and other airlines have been struggling to manage a spike in summer travel demand, which has strained airport and airline resources, leading to lengthy delays.
As a result, Air Canada said it would cut 15 per cent of its summer schedule, or roughly 9,500 flights.
“The past three months have been very challenging for our company, our employees, and customers from an operational perspective,” chief executive Michael Rousseau said in a press release accompanying the earnings.
“The industry worldwide is facing unprecedented conditions as it emerges from pandemic-related restrictions,” he added. “The situation is particularly challenging in Canada, where we have gone from a near two-year shutdown of air travel to rebuilding our capacity back to close to 80 per cent of 2019 levels in just a few months.”
The airline raised fares 12 per cent this quarter, which covers the three-month period ending June 30, because of higher fuel costs, said Lucie Guillemette, chief commercial officer.
Air Canada has been hit with a wave of bad press this quarter as customers speak out over flight changes and lost baggage.
One man was prevented from boarding a flight to San Francisco only to be told by Air Canada that his cats had flown without him, and that he would need to go to the West Coast himself to get them.
Another couple spent their cruise vacation in sweatpants after Air Canada delivered their lost luggage to their Ottawa home, instead of to their cruise ship, as promised.
A groom complained that Air Canada had ruined his Trinidad wedding after the bag with his custom suit was left behind.
“We acknowledge the inconveniences and disruptions some of our customers have faced, and we deeply regret this,” Rousseau said in the press release. “This is not business as usual for us. We thank our customers for their understanding and the loyalty they are showing to Air Canada in these unprecedented times.”
Staff are struggling, too. An anonymous Air Canada employee told Business Insider that employee morale is the lowest she’s ever seen it, even when compared to the 9-11 and SARS eras.
The source chose to remain anonymous, but Insider said it verified her employment. She said staff were being underpaid by the company and mistreated by passengers who are frustrated by the delays.
A spokesperson told Insider that the company would not respond to comments from anonymous employees.
The airline also said that it had adjusted employee compensation in the early summer to reflect the difficult environment.
FINANCIALS
Operating revenue reached $3.98 billion in the second quarter, up from $837 million in the same quarter a year ago.
The company posted a net loss of $386 million or $1.60 per share on diluted basis, compared with a net loss of $1.17 billion or $3.31 per share in the same quarter last year.
The company generated $154 million of EBITDA in the second quarter, an improvement over the negative quarterly EBITDA of $656 million in the same quarter last year.
After having lost nearly 30 per cent of their value this year to date, shares were trading down slightly around $17.30 at 10:01 a.m. EST time on Tuesday.
OUTLOOK
The executives are optimistic. They don’t see the operational issues going on forever. “We view these factors as being temporary in nature and directly related to the post-COVID ramp up,” said Craig Landry, chief operating officer.
“We are encouraged by the progress in the last few weeks and we expect continuous improvement in the weeks to come,” Rousseau said.
The airline recently signed an agreement with United Airlines which it hopes will give passengers more flight options to the U.S. The company also plans to establish a code-sharing agreement with Emirates airline, operational in 2022, in order to give customers more choice.
Air Canada hasn’t been hit by fears of an impending recession in any significant way, the executives said. “At this moment, we are not seeing any noticeable impact from market forecasts of a possible economic slowdown,” said Guillemette.
Going forward, the company will continue to contend with increased demand, higher-than-normal fuel costs, and workforce capacity issues.