Air Canada posted a record $4.9 billion in revenue in the first quarter – nearly double what it earned a year ago. The quarter also marked the second in a row where the carrier has turned a profit following 11 straight quarters of losses totalling $10.1 billion. Results at Air Canada Vacations were also “remarkable,” says the airline.
Reported late last week, the carrier says its net income amounted to $4 million, in stark contrast to $974 million in losses a year ago – and occurred even as higher costs tamped down net earnings.
Chief executive Michael Rousseau said the results for the three months ended March 31 beat out all expectations for a traditionally weaker quarter, and that he believes demand will persist amid strong advance bookings for the rest of the year. They hit $5.3 billion at the end of March, up from $4.1 billion a year earlier.
“The winter and the start of the spring can be very challenging in North America, especially Canada. Apart from the weather disruptions that can affect all aspects of the air transport system, it usually comes with high traffic flows, particularly with a spring break peak,” Rousseau told analysts on a conference call Friday.
Despite an uncertain economic outlook – and the carrier’s on-time arrival rate of 57 % in March versus 70 %in March 2019 – Air Canada’s sustained profits over the past half-year hint at a return to stability for an industry devastated by the COVID-19 pandemic, when lockdowns, border closures and travel restrictions tanked demand.
The airline’s load factor jumped to 85% last quarter from two-thirds the year before.
Air Canada Vacations, the carrier’s tour package business, yielded “remarkable results,” the CEO said.
The airline’s $4-million profit, however, was a far cry from its first-quarter net earnings of $345 million in 2019, the last full year untouched by COVID-19. That owes partly to a 30% increase in the cost of jet fuel over the past year as well as greater maintenance and labour expenses. But lower-than-expected current jet fuel prices prompted Air Canada last week to raise its financial forecast for the year. The Montreal-based company boosted its adjusted earnings expectations to between $3.5 billion and $4 billion from $2.5 billion to $3 billion.
Pricier tickets are helping too. Passenger yield climbed 9% year over year, despite competition from budget carriers for sun destinations and some domestic routes.
“There is likely ongoing yield pressure from new ultra-low-cost entrants. However, these new competitive pressures have been more than offset by a robust international environment and significant ground package revenues at Air Canada Vacations, which outperformed our expectations,” said TD Cowen analyst Helane Becker in a note to investors.
Business travellers are also finally starting to return – and they’re willing to pay. About 30% of year-over-year revenue growth last quarter came from “premium cabins,” said Mark Galardo, Air Canada’s head of revenue and network planning.
“The strong and improving collaboration between our people and our ecosystem partners has been key to our service delivery during this period, and sets our expectation for continued strong performance through the summer,” Rousseau added.