Air Canada sees no red flags that fears of a potential recession, rising costs of living or airport scrambles have curtailed travelers’ appetites.
Updated yesterday at 4:26 p.m.
The company’s management made this observation during the unveiling of its second quarter results on Tuesday. The air carrier, based in Montreal, has also recorded a reduction in its net loss thanks to the rebound in demand.
“Demand was strong in June and continued into the third quarter,” Chief Commercial Officer Lucie Guillemette said during a conference call with financial analysts. “At this time, we do not see any effect related to forecasts of a possible economic slowdown. »
In a sign of the strength of anticipated demand, the liability for tickets sold in advance, that is, tickets sold in anticipation of a trip that has not yet taken place, has exceeded pre-pandemic levels. At 4.6 billion as of June 30, the amount of this liability is 24% higher than in the second quarter of 2019 (before the pandemic).
“It suggests a strong traffic this summer and potentially this winter,” said analyst Konark Gupta of Scotiabank.
Mme Guillemette pointed out that the pace of the recovery accelerated during the month of June. She said revenues increased by 15% from April to May while they grew by 25% to 30% from May to June.
The recovery is proceeding at high speed, but concerns remain over high fuel prices, said Canaccord Genuity analyst Matthew Lee. He notes that the gap between the price of a barrel of oil and jet fuel is widening. While fuel prices were around 40% higher in 2019, the gap is now close to 100%.
Air Canada has optimized its supply, but the analyst still believes that fuel costs will increase due to this discrepancy. “We expect a 50% deviation, rather than 30% in our previous forecast. »
The analyst adds that the recovery is long overdue in Asia due to more severe health restrictions, particularly in China. “As Asia Pacific has historically accounted for 20% of capacity, we believe that improvement in the region is needed for the recovery to be sustainable,” he comments.
Apologies for “temporary” problems
The rapid resumption of air travel, however, caught the global airline industry by surprise as travelers grappled with long lines, delays and even cancellations.
However, the situation has been particularly difficult in Canada, underlines the president and chief executive officer, Michael Rousseau. “We went from a virtual closure of air traffic, which lasted two years, to a return of capacity to almost 80% of 2019 thresholds in just a few months. »
During the conference call, management apologized for the inconvenience experienced by travelers and employees. Air Canada believes this is a temporary situation. “We have never seen demand increase so strongly in such a short period of time,” said Chief Operating Officer Craig Landry.
The situation has improved with regard to flight cancellations, according to a compilation by the aeronautical data firm Cirium. Air Canada canceled 7.36% of its domestic flights between 1er July and July 15. This proportion reached 10.45% at Montréal-Trudeau airport and 8.67% at Pearson airport in Toronto.
The number of canceled domestic flights decreased to 4.17% for the period from July 15 to July 1er August across the country, with an improvement in Montreal (4.76%) and Toronto (5.77%). By comparison, the carrier had canceled 3.33% of its domestic flights in 2019, before the pandemic.
To give an idea of the scale of the rebound, Mr. Landry pointed out that the company had carried out 20,603 flights and transported 1.2 million customers in the second quarter of the previous year. A year later, Air Canada made 84,643 flights for 9.1 million passengers. “It’s a fourfold increase in the number of flights and it represents almost eight times more passengers. »
The results
For the second quarter, Air Canada announced a net loss of 386 million, compared to a net loss of 1.165 billion for the same period last year. The diluted net loss per share reached $1.60, compared to a loss of $3.31 for the same period last year.
Revenues, for their part, multiplied by five to settle at 3.98 billion.
Prior to the earnings release, analysts had expected a net loss of 83 cents per share, according to data firm Refinitiv.
Air Canada shares gained 14 cents, or 0.81%, to $17.53 at the close of trading on the Toronto Stock Exchange.