Third-quarter revenues are down, but Air Canada is calling for a significantly increased profit margin for 2024.
Canada’s largest airline today reported a third-quarter profit of $2.04 billion, up from $1.25 billion in the same quarter last year, as its operating revenue edged slower.
Operating revenue for the quarter totalled $6.11 billion, down from $6.34 billion in the same quarter last year.
But Air Canada is expecting a strong fourth quarter and said it has raised its expected profit for the year to $3.5 billion, up from a range of $3.1 to $3.4 billion in the forecast issued a few months ago.
Speaking on a conference call with reporters, AC President and CEO Michael Rousseau said he sees no slowdown in leisure demand for the fourth quarter of 2024. He also said he expects “elevated yields” in the Pacific region, which will lead to “strong performance overall.”
Air Canada on 30OCT announced it will soon resume flights from YVR to Beijing, and also return to daily flights from Vancouver to Shanghai.
Asked why they’re boosting their suggested profits in such a robust fashion, airline officials said they’re still not at the capacity levels they had in 2019, and that the airline is still restoring some domestic links and fortifying international routes. Longer, overseas routes often carry more business travellers at the front of the plane and bring in higher revenue.
The Globe and Mail reports that North American airlines with international flights “are cashing in on a booming demand for overseas travel and a resurgence in business bookings.”
Air Canada stock was up more than 10% in early trading, a sign that market analysts feel good about the company’s earnings report and it’s future economic picture.
“Air Canada reported solid results for the third quarter on key metrics, with operating revenues of $6.1 billion and operating income of $1 billion,” Rousseau said in AC’s official media statement.
Airline officials said domestic service is expected to be relatively stable, and that early indications suggest trans-Atlantic service will bounce back following a period of weakness due to a rapid increase in capacity. The “watch out” is in the Pacific region, where there’s a bit of pressure, they said.
Mark Galardo, Executive Vice President, Revenue and Network Planning and President, Cargo, said international performance has been strong, with multiple new routes performing above expectations. Proactive goodwill policies helped mitigate disruption during AC’s tense negotiations with pilots, which ended in a four-year deal, but Galardo said there was a softening of bookings in September and a little in October.
Officials said ongoing supply chain pressures, aircraft availability, foreign exchange and geopolitical conditions will impact capacity growth for next year, with a mid-single range growth expected in 2025.
Rousseau said on the call that Air Canada Vacations could be impacted by high hotel costs and foreign exchange issues. Ongoing supply Officials said ACV has helped Air Canada “reach into specialized markets and serve a much wider range” of travel needs.
Air Canada Vacations tour products have seen stronger growth in Europe and other international markets, which helps grow Air Canada’s global footprint.
Officials also said AC is investing in its airport lounges and enhancing its fleet, with 88 new, state-of-the-art aircraft over the next five years. That includes nine new A-220s and two “game-changing” a321 XLR’s, which Airbus says burn up to 30% less fuel per seat than previous generation aircraft.
“I thank our customers for their loyalty and reiterate our promise to keep providing industry-leading products and services to them,” he said in Air Canada’s prepared statement. “The demand environment remains favourable. We have adjusted our full year guidance and underlying assumptions to account for the evolution of the fuel price environment and for certain contract-related adjustments.
“We are delivering on our commitments and are confident in our future,” Rousseau said.