Air Canada ((TSE:AC)) has held its Q1 earnings call. Read on for the main highlights of the call.
Air Canada’s Earnings Call: Navigating Challenges with Strategic Resilience
Despite facing significant challenges such as an operating loss and a decline in passenger revenue, Air Canada demonstrated resilience during its recent earnings call. The airline maintained a stable revenue stream and showcased strong performance in areas like Aeroplan and cargo. Effective cost management, balance sheet strength, and strategic network diversification were highlighted as positive indicators, even as the company navigates market uncertainties.
Stable Revenue and Advanced Ticket Sales Growth
Air Canada reported first-quarter revenues of $5.2 billion, mirroring last year’s figures. A significant highlight was the growth in advanced ticket sales, which increased by $1 billion from the end of 2024. This growth was instrumental in driving $1.5 billion in cash from operations and generating $831 million in free cash flow for the quarter.
Strong Performance in Key Areas
The airline’s Aeroplan program continued to perform robustly, with third-party billings growing 7% year-over-year. Additionally, cargo revenues saw a substantial increase of 16%, reaching $250 million compared to the previous year, showcasing the strength of Air Canada’s diversified revenue streams.
Cost Management and Balance Sheet Strength
Air Canada has launched a $150 million cost reduction program for 2025, demonstrating its commitment to efficient cost management. The company reported a net leverage ratio of 1.3% and completed a share buyback program, purchasing and canceling 35.8 million shares, further strengthening its financial position.
Network Diversification and Capacity Reallocation
The airline’s diversified network allowed for effective capacity reallocation in response to changing demand. New routes, such as Montreal-Edinburgh, and expansion into Latin America were announced, highlighting Air Canada’s strategic approach to network diversification.
Operating Loss and Passenger Revenue Decline
Air Canada faced an operating loss of $108 million, with quarterly passenger revenues totaling $4.3 billion, marking a 3% decrease year-over-year. This decline underscores the challenges faced in the current market environment.
Decline in Transborder Market
A decline in interest among Canadians for travel to the U.S. was noted, with booking declines in the transborder market expected to be in the low-teens over the next six months, reflecting shifting travel preferences.
Operational Challenges
The company encountered operational disruptions due to two major winter storms and maintenance challenges with the Airbus A220 fleet. These disruptions had an estimated EBITDA impact of CAD35 million for the quarter, highlighting the operational hurdles faced.
Updated Guidance Reflecting Market Uncertainty
Air Canada’s updated guidance reflects a cautious outlook amid ongoing market uncertainties. The company expects 2025 adjusted EBITDA to range between $3.2 billion and $3.6 billion, considering recent market trends. Despite a 3% year-over-year decline in passenger revenues and a 5% reduction in transborder revenue, Air Canada remains focused on strategic capacity adjustments and cost management to navigate the uncertain environment.
In summary, Air Canada’s earnings call highlighted both challenges and strategic initiatives aimed at navigating a complex market landscape. While facing an operating loss and passenger revenue decline, the airline’s strong performance in areas like Aeroplan and cargo, coupled with effective cost management and network diversification, positions it to tackle future uncertainties. The forward-looking guidance underscores a cautious yet strategic approach to maintaining financial stability and growth.