Demand lifts Air Canada revenue
Despite higher bookings, however, lag in business travel means a net loss of nearly $1 billion
Air Canada more than tripled its revenue last quarter as demand for travel revved back up, though a net loss of nearly $1 billion signalled the pandemic recovery is far from complete.
After the Omicron variant of COVID-19 slowed bookings in January, the airline’s sales spiked in March as travel restrictions eased, pushing bookings to 90 per cent of 2019 levels.
“We are very positive on the rest of the year and continued growth over the next several years,” CEO Michael Rousseau told analysts on a conference call Tuesday.
The country’s largest airline maintained full-year forecasts that capacity will average out at roughly three-quarters of what it was in 2019. However, Air Canada’s capacity continues to lag its U.S. counterparts and business travel remains at half the volume it hit three years ago, said chief commercial officer Lucie Guillemette. “International might take a little bit longer,” she said, referring to overseas business bookings, even as domestic and leisure travel ramp up.
Air Canada hopes to take advantage of a renewed appetite for corporate travel in the United States as the carrier shores up its U.S. flight schedule, she added. Meanwhile, rising fuel costs, inflation and uncertainty stemming from Russia’s invasion of Ukraine are adding headwinds to a buffeted industry.
“We believe that much of this increase can be recovered in fares,” chief financial officer Amos Kazzaz said of jet fuel prices, which were up nearly 119 per cent year over year as of April 22, according to the International Air Transport Association. Spiking in March amid the war in Ukraine, the price has nudged down by 5.5 per cent over the past month.
RBC analyst Walter Spracklin said fuel costs have “eaten into the otherwise positive benefit of higher ticket fares,” while the prolonged plunge in business travel remains a “key risk” for Air Canada.
“Travellers returned in force starting around March,” Helane Becker, an aviation analyst for financial-services firm Cowen, said in a note to investors. “Even with the disappointing first-quarter results, we believe they’ll be on track as the recovery continues.”
To offset ticket sales that remain below pre-pandemic levels, the Montreal-based airline continued to expand cargo services, looking to seize on demand caused by clogged supply chains and a stabilizing but persistent e-commerce surge.
The freighter network pushed into Atlantic Canada this month as trips to Halifax got underway. Service to Frankfurt, Istanbul and Madrid is expected to launch in May.
Cargo revenue grew 42 per cent year over year to $398 million in the first quarter — 15 per cent of total revenue — with two new Boeing 767-300 freighters set for delivery this year.
“Looking ahead, we expect this to soften as we convert aircraft back to passenger configurations and receive our new freighter aircraft,” Guillemette said of cargo revenue.
Meanwhile bookings via the airline’s revamped Aeroplan rewards program surpassed those from the first three months of 2019 by 19 per cent, Rousseau added.
Air Canada reported a first-quarter loss of $974 million or $2.72 per diluted for its first quarter compared with a loss of $1.30 billion or $3.90 per diluted share a year earlier.
Revenue totalled $2.57 billion for the three months ended March 31, compared with $729 million in the first three months of 2021.
Analysts on average had predicted a loss of $1.49 per share, according to financial data firm Refinitiv.