Air Canada plunges to net loss of $60 million in first quarter as labour costs climb 21%

Air Canada's shares fell over 8% on May 2, 2024, after it posted a net loss of CA$81 million ($59.3 million) in the first quarter of the year, a sharp fall from its net profit of CA$4 million ($2.9 million) from the first quarter of last year. Its total revenues were CA$5.2bn ($3.8bn), up 7% YoY from CA$4.9bn in the first quarter of 2023. Though, its total operating expenses climbed in tandem from CA$4.9bn ($3.6bn) last year to CA$5.2bn ($3.8bn). The airline's expenses outgrew its capacity growth of 11% YoY. ""Our labour expense increased to 21%,"" explained Air Canada chief financial officer John Di Bert in an earnings call, ""driven by accruals for profit sharing and other wage-related initiatives, and by 7% higher FTEs year-over-year."" He added that the increase also includes ""accrual for a future pilot agreement"", with the airline having ongoing negotiations over pay with its pilots for over 11 months. The union representing its pilots, the Air Line Pilots Association (ALPA), responded to the results, stating that it is ""looking for a world-class contract that is commensurate with pilots at US legacy airlines"", citing recent competitive contracts being awarded to pilots by American, Delta, Southwest, and United in the past year. Air Canada ALPA master executive council chair Charlene Hudy said Air Canada's free cash flow at CA$1.1bn ($805 million) for the first quarter, was ""thanks in large part to contributions and dedications from the Air Canada pilots, whose post-9/11 pay cuts have yet to be corrected."" Hudy said that Air Canada pilots are currently the ""only legacy pilot group in North America who haven't established standard North American pay levels."" Air Canada's total liquidity at the end of the first quarter was CA$10bn ($7.3bn), with its net debt being reduced by CA$786 million ($575.3 million) to CA$3.8bn ($2.8bn) at the end of the first quarter. ""In the quarter we significantly reduced our outstanding senior secured indebtedness by almost $1.1 billion and increased available undrawn amounts under the revolving facility by $375 million,"" said Di Bert. He added the airline is looking to continue to strengthen its balance sheet and reduce its total debt. In an earnings call, its executive vice president, revenue and network planning Mark Galardo said: ""We didn't see a big growth as some of our American peers did. But as we looked late into the quarter and into the second quarter, we're starting to see some very encouraging signals on corporate demand, to the tune of almost 10-20% greater on a YoY basis."" Air Canada had added one 787-9 Dreamliner aircraft to its fleet in the first quarter, as well as three leased A320 aircraft. Di Bert said the airline expects another 787-9, two A330-300s and two A220s in ""the coming months."" He said: ""We remain in a tight capacity environment and are putting in place various measures to secure additional lift."" He added that the airline is ""in the process"" of arranging agreement for additional 737 MAX 8s that would be scheduled for delivery later in the year and then enter into service next year. For the second quarter, it expects its available seat miles (ASM) capacity to increase by around 7% YoY and 6-8% for the full year. In addition, it reaffirmed its adjusted EBITDA of CA$3.7-4.2bn ($2.7-3.1bn).