Air Canada today reported its second quarter 2022 financial results.
“The past three months have been very challenging for our company, our employees, and customers from an operational perspective. The path to recovery from any serious event is rarely straight and easy. I thank our employees for their incredibly hard work, demonstrated professionalism and commitment as we safely transported over 9.1 million customers in the quarter, nearly 8 million more than the second quarter of 2021 or about 70% of total customers carried in the full year 2021,” said Michael Rousseau, President and Chief Executive Officer of Air Canada.
“The industry worldwide is facing unprecedented conditions as it emerges from pandemic-related restrictions. The situation is particularly challenging in Canada, where we have gone from a near two-year shutdown of air travel to rebuilding our capacity back to close to 80 per cent of 2019 levels in just a few months. Despite meticulous planning and projecting, participants involved in the air transport system are facing significant pressure in restarting. We continue to work together to restore the travel experience to expectations and are encouraged by recent improvements.”
“From a financial perspective, we are pleased with our results as we generated $154 million of EBITDA* in the quarter, a significant increase from a negative quarterly EBITDA of $656 million a year ago, and operating revenues neared $4 billion in the quarter, an improvement of about $3.1 billion from the second quarter of 2021. Compared to pre-pandemic levels, 2022 second quarter advance ticket sales reached 94 per cent of those in the same quarter of 2019. In the second quarter, our operating capacity, measured by available seat miles, was 73 per cent of the same quarter in 2019, and despite the lower capacity, passenger revenues were 80 per cent of those generated in the second quarter of 2019, driven by higher yields,” said Mr. Rousseau.
“We expected travel would rebound significantly once restrictions were lifted and prepared accordingly. We entered the peak summer travel period at close to 90 per cent of our pre-pandemic staffing levels, while prudently planning to operate approximately 80 per cent of our pre-pandemic schedule over that period. In the second quarter of 2022, we delivered a load factor of 80.5%, representing a significant improvement from the second quarter of 2021 levels but still declined about four percentage points from the second quarter of 2019. To further support the industry’s recovery efforts and mitigate the short-term impact on customers and employees, we recently took additional steps to flatten peaks and smooth the flow of traffic, by proactively reducing our schedule over July and August.”
“Finally, while many participants play a unique and essential role in the air transport system, we recognize that our customers experience these interconnected efforts as a single journey. We are working closely with our service providers and governments to keep addressing the issues aviation is facing in Canada and globally. We acknowledge the inconveniences and disruptions some of our customers have faced, and we deeply regret this. This is not business as usual for us. We thank our customers for their understanding and the loyalty they are showing to Air Canada in these unprecedented times,” concluded Mr. Rousseau.
Air Canada reported the following financial results for the second quarter of 2022:
- Operating capacity, measured by Available Seat Miles (ASMs) increased about five times from the second quarter of 2021. Capacity in the second quarter was 73 per cent of the second quarter of 2019, in line with projections in Air Canada’s first quarter 2022 earnings release dated April 26, 2022.
- Passenger revenues of $3.441 billion increased about eight times from the second quarter of 2021.
- Operating revenues of $3.981 billion increased almost five times from the second quarter of 2021.
- Operating expenses of $4.234 billion increased $2.264 billion from the second quarter of 2021.
- Cost per available seat mile (CASM) decreased to 20.8 cents from the second quarter 2021 CASM of 49.3 cents.
- Adjusted cost per available seat mile (Adjusted CASM)* of 13.1 cents compared to second quarter 2021 adjusted CASM of 41.5 cents.
- Operating loss of $253 million, an improvement when compared to an operating loss of $1.133 billion in the second quarter of 2021.
- EBITDA* (excluding special items) or earnings before interest, taxes, depreciation, and amortization of $154 million, better than the negative EBITDA of $656 million in the second quarter of 2021.
- Net loss of $386 million or $1.60 per diluted share compared to a net loss of $1.165 billion or $3.31 per diluted share in the second quarter of 2021.
- Cash from operations of $1.077 billion compared to cash used in operations of $1.377 billion in the second quarter of 2021. This improvement of $2.454 billion was driven by better operating results and strong advance ticket sales in the second quarter of 2022, and considers the refund of eligible non-refundable tickets, which amounted to $997 million in the second quarter of 2021.
* EBITDA (excluding special items), EBITDA margin, adjusted pre-tax income (loss), free cash flow, net debt, and adjusted CASM (discussed in this news release) are non-GAAP financial measures, non-GAAP ratios, or supplemental financial measures. Such measures are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results. Refer to the “Non-GAAP Financial Measures” section of this news release for descriptions of Air Canada non-GAAP financial measures, non-GAAP ratios, and supplemental financial measures, and for a reconciliation of Air Canada non-GAAP measures used in this news release to the most comparable GAAP financial measure.
Easing of Travel Restrictions
During the second quarter of 2022, there was a further easing of travel restrictions by the Government of Canada. These changes included:
- Since April 1, 2022, fully vaccinated travellers are no longer required to provide a negative pre-entry COVID-19 test result.
- Randomized testing for fully vaccinated travellers was temporarily suspended as of June 11, 2022, and resumed on July 19, 2022 (including for unvaccinated and for randomly selected fully vaccinated travellers) though it is now performed offsite.
- Since June 20, 2022, passengers are no longer required to present a proof of vaccination for boarding an aircraft in Canada. The requirements for passengers entering Canada remain unchanged.
Foreign nationals must qualify as fully vaccinated to enter Canada unless they meet an exemption set out in the Orders made under the Quarantine Act. Generally, unvaccinated or partially vaccinated travellers allowed to enter Canada remain subject to the federal requirement to quarantine and take a COVID-19 test prior to arrival, at arrival, and on day eight after arrival.
Route Network and Schedule
In late June 2022, in response to the unprecedented challenges faced by the air transportation system, Air Canada decided to proactively cancel about 8% of its scheduled flights in July and August 2022. This reduction represents about 154 fewer flights per day, on average, primarily on domestic and U.S. transborder routes to and from Toronto and Montreal(at peak times), or a total of about 378 million ASMs.
In July 2022, Air Canada finalized an agreement for the purchase of two new Boeing 777 freighter aircraft with deliveries expected in 2024.
For the third quarter of 2022, Air Canada plans to increase its ASM capacity by about 131 per cent from the same quarter in 2021 (or approximately 79 per cent of third quarter 2019 ASM capacity).
Air Canada is now providing the following guidance for the full year 2022:
- Air Canada plans to increase its full year 2022 ASM capacity by about 150 per cent from 2021 ASM levels (or about 74 per cent of 2019 ASM levels). Air Canada will continue to adjust capacity and take other measures as required, including to account for passenger demand, public health guidelines, and travel restrictions globally, as well as other factors, such as inflation and other cost pressures.
- For 2022, Air Canada expects Adjusted CASM to be about 15 to 17 per cent above 2019 levels. The variance to prior guidance is mainly due to an increase in the number of customers carried, which translates into higher passenger service and distribution costs. To a lesser extent, it is also attributable to an increase in wages, salaries and benefits.
- For 2022, Air Canada maintains its expectation of an annual EBITDA margin* of about 8 to 11 per cent.
Assumptions were made by Air Canada in preparing and making forward-looking statements. Among these, Air Canada assumes moderate Canadian GDP growth for 2022. Air Canada now assumes that the Canadian dollar will trade, on average, at C$1.28 per U.S. dollar for the full year 2022 and that the price of jet fuel will average C$1.27 per litre for the full year 2022.
Air Canada aircraft photo gallery: