Air Canada ((TSE:AC)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Air Canada’s recent earnings call painted a mixed picture for investors and stakeholders. While there are positive developments in booking trends and operational metrics, concerns loom over labor disruptions and a decline in passenger revenues. The company remains optimistic about its future with new routes and fleet expansion, though challenges with fleet delivery persist.
Strong Q4 Booking Trends
Air Canada reported robust booking trends for the fourth quarter, with expectations of year-over-year growth in adjusted EBITDA. This positive outlook suggests a potential rebound in financial performance as the year concludes.
Operational Metrics Improvement
The airline achieved significant improvements in operational metrics, with on-time performance and Net Promoter Score surpassing both internal targets and last year’s figures. These enhancements reflect the company’s focus on customer satisfaction and operational efficiency.
Strong Premium Cabin and Corporate Performance
Revenues from the premium cabin outpaced those from the economy cabin by 6 percentage points. Additionally, corporate revenues saw an 11% year-over-year growth in September, indicating a strong demand from business travelers.
Continued Network and Fleet Expansion
Air Canada is set to expand its network with new international routes and plans to introduce new aircraft types, including the A321XLR and the 787-10, by 2026. This expansion is part of the airline’s strategy to enhance its global presence and operational capabilities.
Cost Reduction Program Progress
The company’s $150 million cost reduction program is on track, focusing on operational efficiencies and management headcount reductions. This initiative aims to streamline operations and improve financial performance.
Impact of Labor Disruption
Labor disruptions had a significant impact, resulting in a $430 million hit to revenues and a 5% decline in operating revenues compared to the previous year. This disruption underscores the challenges faced by the airline in maintaining operational continuity.
Decline in Passenger Revenues
Passenger revenues for the third quarter fell by 6% to $5.2 billion, with a 2% decrease in capacity. This decline highlights the ongoing challenges in the passenger segment amid external disruptions.
Adjusted EBITDA Decrease
Adjusted EBITDA dropped to $961 million, a decrease of $562 million from the same quarter in 2024. The decline is primarily attributed to the labor disruption, affecting overall profitability.
Challenges with Fleet Delivery
Air Canada anticipates fleet delivery delays in 2026, with fewer aircraft than expected. This challenge could impact the airline’s expansion plans and operational efficiency.
Forward-Looking Guidance
Despite a challenging quarter, Air Canada provided updated guidance, forecasting a 0.75% capacity increase over 2024 and adjusted EBITDA between $2.95 billion and $3.05 billion. The company also anticipates free cash flow between breakeven and $200 million for the year. Looking ahead, Air Canada plans to add 35 new aircraft in 2026, although some delivery delays are expected.
In summary, Air Canada’s earnings call reflects a cautious optimism amid challenges. While operational improvements and strong booking trends provide a positive outlook, labor disruptions and fleet delivery issues pose significant hurdles. Investors and stakeholders will be keenly watching how the airline navigates these challenges in the coming quarters.