The logo of Air Canada is seen on the tails of planes at the airport in Montreal, Que., Monday, June 26, 2023. THE CANADIAN PRESS/Adrian Wyld (The Canadian Press)
Shares of Air Canada (AC.TO) fell as much as seven per cent on Friday following the release of quarterly financial results, as the airline reported rising operating expenses driven in part by higher labour costs.
Canada’s largest airline reported an adjusted net loss of $44 million, or 12 cents per diluted share, in the fourth quarter of the year, compared to an adjusted loss of $217 million, or 61 cents per share, during the same quarter in 2022. While the quarterly loss was an improvement from the previous year, analysts had expected an adjusted per-share quarterly loss of four cents.
Air Canada’s stock finished the trading day on Friday at $18 per share, a decline of nearly seven per cent compared to Thursday’s close.
Still, the airline saw total sales improve in 2023 as it expanded capacity amid strong demand. Operating revenue in the quarter totalled $5.18 billion, an increase of 11 per cent from $4.68 billion last year, as capacity grew nine per cent annually. Net income increased to $184 million in the quarter, up from $168 million last year.
Chief executive Michael Rousseau called 2023 “a very successful year” for the airline.
“We are strategically adding to our key hubs, enhancing our level of customer service and improving our operational reliability,” he said on a conference call with analysts.
Operating expenses also rose, due to higher costs related to the increase in capacity, as well as better wages, salaries and benefits. Air Canada says operating expenses in 2023 overall grew 17 per cent related to traffic growth. Labour costs were up 21 per cent year over year in 2023, as the airline’s full-time employee count grew 17 per cent and wage inflation and profit-sharing also increased.
North American carriers with major international operations are benefiting from strong travel demand, but face cost pressures as pilots and other workers make gains in bargaining.
Air Canada is in the midst of labour negotiations with the union representing its pilots. A representative of the Air Line Pilots Association (ALPA) said on Thursday that Air Canada pilots are seeing progress in contract talks after a private independent mediator was hired to bridge gaps over pay and quality-of-life demands.
“We are working with ALPA and have agreed upon a framework for continuous constructive bargaining through an independent and experienced mediator,” Rousseau said.
“This provides stability while we work together over the next few months with a goal to reach a collective agreement that is beneficial to all stakeholders.”
Analysts see opportunity amid stock slump
Air Canada has so far continued to see strong demand in 2024, particularly on international routes. The airline says it is seeing greater demand for destinations in southern Europe compared to the second and third quarters of last year, prompting it to add capacity to Greece, Italy and Spain. The airline is also seeing stronger demand in its Asia-Pacific service, and will be adding routes to Singapore and Japan later this year.
The airline says it expects a “normalized environment” in the domestic market due to its competitive nature.
“However, we are well-positioned to compete and the overall diversification of our network gives us multiple options to be deploying capacity to other geographies,” Mark Galardo, Air Canada’s executive vice-president of network planning, said on the conference call.
National Bank analyst Cameron Doerksen wrote in a note to clients on Friday that while the fourth-quarter results were slightly below expectations and costs are trending higher, the airline’s 2024 guidance “looks achievable.” Air Canada said Friday it expects adjusted earnings before interest, taxes, depreciation and amortization to be between $3.7 billion and $4.2 billion in 2024, up from its previous target of between $3.5 billion and $4 billion.
“Although the market remains concerned about how sustainable demand for air travel will be in 2024 as well as higher costs, we continue to argue that current valuation on Air Canada shares is pricing in a material decline in profitability for 2024 that is much worse than AC’s guidance,” Doerksen wrote.
TD Cowen analyst Helane Becker said in a note to clients on Friday that Air Canada remains a good long-term opportunity.
“We would build positions in Air Canada and continue to view the stock as a good long-term holding,” Becker wrote.
“It’s the dominant player in a market that is geographically advantageous to mainline carriers, has numerous revenue tailwinds, one of the best loyalty programs in the industry, is generating (free cash flow) and has a very strong credit profile.”
With files from Reuters
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
