Air Canada continued its post-pandemic recovery in the last quarter of 2023, earning roughly 10% higher profits year-over-year and, more importantly, registering a nearly $4-billion swing into the black for the year compared to 2022.
On Friday the airline said its net income rose to $184 million in the fourth quarter from $168 million a year earlier, and net income over 12 months posted a profit of $2.28 billion from a $1.70-billion loss in 2022.
More flights and higher fares on international trips – particularly over the Atlantic and Pacific oceans – drove a 12% rise in passenger revenues, said CEO Michael Rousseau, who called the full year “very successful.”
Net income surged despite a 21% increase in labour costs in the fourth quarter that arose from 3,200 more employees as of Dec. 31 than at the start of the year, as well as from “wage inflation” and profit sharing, said CFO John Di Bert.
2024
Nevertheless, even with advance bookings up 6% year-over-year last quarter, Air Canada is proceeding more cautiously on growth plans this year. The country’s biggest airline aims to boost flight capacity by 6 to 8% – below analysts’ expectations of a 10%.
The carrier’s brake tapping means it won’t exceed 2019 capacity levels until 2025, five years after the COVID-19 pandemic first hammered the travel industry.
“This is reasonable for us as we continue to see industry supply chain pressures and other constraining factors,” head of network planning Mark Galardo told analysts Friday. Those pressures may include production delays at Boeing Co. and Airbus SE, with at least one Air Canada plane delivery this year pushed back to 2025.
The slowdown also suggests the “rapid expansion in leisure routes may be scaling back,” said RBC Capital Markets analyst Walter Spracklin – which stands “in contrast” to plans by other large airlines in North America, according to Savanthi Syth of Raymond James.
Greater costs comprise much of the uncertainty facing Air Canada this year.
A new agreement with its nearly 5,300 pilots now under negotiation is poised to hike wages by a yet-to-be determined amount. Customer compensation rules currently being drafted are also among the “net headwinds” set to blow against profit margins, as are likely hikes to airport fees, Di Bert said.
Competition is another area to watch, as Porter Airlines, Flair Airlines and Lynx Air strive to carry out ambitious expansions (the latter to reported to considering a merger).