Air Canada posts Q4 profit, offering new optimism after tough year for airline

Air Canada’s comeback from pandemic shutdowns appears to be gaining momentum after the airline posted a profit in its latest quarter, offering hope the industry has turned a corner even as the country’s largest airline posted a $1.7 billion loss for the year.

The company reported a $168-million profit for the three months ending Dec. 31,  as passenger and operating revenues recovered to record highs.

The period included the turbulent Christmas travel season that culminated in a continent-wide storm that caused “four-foot icicles” on some aircraft, an airline executive said during a call with analysts on Friday.

“Weather events were more extreme than usual, even for Canada,” Air Canada’s chief operations officer Craig Landry said. “It also coincided with some of the highest peak travel dates of the holiday season.”

Extreme cold in Calgary made de-icing activities unsafe, baggage handling systems in Toronto froze, giant icicles formed on aircraft and bridges in Vancouver, and heavy snowfall affected takeoff and landing times across the country, he said.

“As flights take progressive delays due to weather, this can cause our crews to exceed their maximum duty days,” Landry said. “It can lead to unplanned flight cancellations.”

Despite the challenging winter conditions, the Montreal-based airline’s fourth-quarter profit amounted to 41 cents per diluted share, compared with a loss of $493 million or $1.38 in the same period during 2021.

Overall, Air Canada still posted a $1.7 billion loss for the year amid a rocky recovery from COVID-19 restrictions and a chaotic summer travel season marked by delays and cancellations as airports, border services and airlines struggled to cope with a surge in passengers.

But its strong fourth quarter helped brighten the outlook for 2023 and has the leadership of the country’s largest airline charting a turnaround.

Indeed, Air Canada announced plans to boost capacity this year.

The company said it plans to increase its so-called available seat miles — an aviation term that refers to an airline’s carrying capacity and ability to generate revenues — by about 50 per cent in the first quarter of 2023 compared with the same period last year.

For 2024, Air Canada said it expects its capacity to reach 2019 levels — a target that signals a complete post-pandemic recovery for the airline.

“The progress is a tribute to the deep resilience we have built into our company for long term stability,” Michael Rousseau, chief executive of Air Canada, said during a call with analysts.

“We expect a solid demand environment in 2023,” he said. “In anticipation, we are building out our global network, continuing our narrow-body fleet renewal, and investing in technology and customer service.”

In its latest quarter, revenue from Air Canada’s core passenger business was up about two per cent compared with the same period of 2019 before the pandemic hit.

The airline’s premium cabin revenue was about 13 per cent higher, supported in part by its loyalty program Aeroplan.

The airline’s vacations ground package revenues contributed to growth in other revenues of $62 million, about 23 per cent higher than the fourth quarter of 2019, Rousseau said.

Air Canada Cargo revenue was up 55 per cent compared to the same quarter pre-pandemic.

Meanwhile, although the airline offered an optimistic outlook for 2023, a slowing economy could weigh on demand and derail Air Canada’s recovery.

The company’s adjusted earnings totalled $389 million, an increase from $22 million in the fourth quarter of 2021.

Air Canada’s passenger revenues hit $4.06 billion, doubling from the fourth quarter 2021 and about two per cent higher than the same period in 2019.

Operating revenues reached $4.68 billion, 71 per cent higher than the fourth quarter 2021 and about six per cent higher than the same quarter in 2019.

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