Air Canada saw its profits fall by half even as revenues rose in its latest quarter, as the country鈥檚 largest airline struggled to complete the final stages of its recovery from COVID-19.
鈥淥ur second-quarter results were solid, although they did not achieve our internal expectations,鈥� CEO Michael Rousseau told analysts on a conference call Wednesday.
Higher capacity and strong demand for Mediterranean vacations drove a year-over-year revenue increase of two per cent to $5.52 billion in the quarter ended June 30.
But revenue-per-seat figures dropped compared with the year before, when soaring post-pandemic demand and lower capacity across the industry allowed for higher fares, fuller planes and wider profit margins.
Net income in Air Canada鈥檚 second quarter fell 51 per cent year-over-year to $410 million.
Operating expenses that stood nine per cent above those of a year earlier help account for the plunge, as the cost of jet fuel and labour rose, chief financial officer John Di Bert said.
Despite a greater number of routes, Air Canada鈥檚 post-COVID-19 rebound remains incomplete four and a half years after borders closed and lockdowns began.
鈥淲e鈥檙e still not back to 2019 levels in terms of scale and the size of the airline,鈥� Di Bert said.
Air Canada鈥檚 adjusted earnings notched slightly higher in the second quarter of 2019 than five years later. The size of the airline鈥檚 fleet is also smaller with 356 aircraft as of June 30, compared with 400 in the second quarter of 2019, although many of the scrapped aircraft were smaller, older and less efficient.
Last Friday the company鈥檚 share price sank to $14.90, a closing low not struck since October 2020.
鈥淟ike our shareholders, we鈥檙e disappointed with our stock price performance here 鈥� especially coming off our record 2023 and having completely repaired the balance sheet. We also know that most global airline stocks are having similar challenges,鈥� Rousseau said.
Earlier this year, executives said corporate travel would help fuel profits in 2024, even as pandemic habits of video conferencing and remote work proved tough to shake.
Premium products 鈥� business cabin and premium economy fares 鈥� accounted for 30 per cent of passenger revenue growth in Air Canada鈥檚 first quarter. The tickets yield fatter profit margins than lower-tier seats.
Momentum on that front has continued, particularly in Canada-U.S. travel, said Mark Galardo, head of revenue and network planning. 鈥淭hat being said, we鈥檙e still about 25 to 30 per cent below where we were in 2019.鈥�
On an adjusted basis, the Montreal-based company earned 98 cents per diluted share, down from an adjusted profit of $1.85 per diluted share in the same quarter a year ago. The result beat analysts鈥� recent expectations of 92 cents per diluted share. But it also came after Air Canada lowered its 2024 financial forecast in late July, saying its planes have not been as full as anticipated due in part to tough competition in international markets.
In its outlook Wednesday, the airline said it plans to increase its flight capacity in the third quarter by between four and 4.5 per cent compared with the same quarter in 2023.
This report by The Canadian Press was first published Aug. 7, 2024.
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Christopher Reynolds, The Canadian Press
