Air Canada reports second quarter results

Air Canada has reported second quarter revenues of C$5.5bn ($4bn), up 2% over the same period last year. The company's operating income was C$466 million ($338.9 million), with an operating margin of 8.4%, down $336 million ($244.4 million) from the previous year. Operating expenses increased by 9% to C$5.1bn ($3.7bn) in the second quarter. As a result, it reported a net income of C$410 million ($298.2 million), or C$1.04 diluted earnings per share, compared to C$838 million ($609.5 million) or C$2.34, respectively, the year prior. Air Canada's free cash flow for the quarter was C$451 million ($328.2 million). The airline had increased its capacity by 6.5% compared to the same period last year, which was in line with its expectations. ""Our adjusted unit cost was well contained, increasing 1.7%,"" said Air Canada CEO and president Michael Rousseau. ""This was supported through rigorous cost discipline, which is always a top priority for us. We will continue to adapt to market conditions, manage capacity proactively and contain costs through productivity and other initiatives."" TD Cowen analysts Helane Becker and Thomas Fitzgerald said: ""Air Canada also cited weakness in European point of sales as well as broader competitive pressure over the Atlantic. They responded by pivoting more capacity onto Pacific lanes. Its new routes are generating above average profit versus the overall network. Premium continues to outpace overall revenue."" Air Canada said it plans to increase its third quarter capacity by around 4-4.5% in comparison to third quarter 2023. It confirmed its full year guidance, which was updated on July 22, 2024. Full year capacity is expected to increase 5.5-6.5% over 2023. Adjusted unit costs are forecast to be up 2.5-3.5% over last year. It estimates an adjusted operating profit of around C$3.1-C$3.4bn ($2.3-2.5bn). Analysts from JP Morgan Jamie Baker and Mark Streeter said: ""Air Canada's evolution from a compelling story of revenge travel and strong yields to one of cost challenges and slipping market share may finally be nearing its conclusion."" JP Morgan analysts had slightly reduces its 2025 forecast for the company after Air Canada's lowered guidance. The airline is in the process of negotiating a deal with its pilots. TD Cowen analysts said: ""Finalising a pilot deal is the top priority. The airline has been accruing for a new deal, but we believe a finalised deal and improved clarity on labour cost inflation will help investors to become more comfortable with the stock."" As of the second quarter's end, it had a total liquidity of C$10.2bn ($7.4bn) and a net debt of C$3.6bn ($2.6bn).