MONTREAL — A “perfect storm” of problems lies behind Air Canada’s wave of flight delays over the summer, its CEO said, even as the country’s largest airline roars back to profitability — with no sign of slowing down.
Despite more staff and revamped technology, Air Canada’s operations in June and July failed to meet “expected levels,” Michael Rousseau told analysts on a conference call Friday.
The chief executive identified “severe weather” — thunderstorms, in particular — and “global supply chain issues” as among the culprits.
Tardiness and cancellations have especially plagued Air Canada’s large network of regional flights, run by Jazz Aviation. Rousseau pointed to a pilot shortage, which he boiled down to several factors: new carriers such as Flair Airlines and Lynx Air competing for labour; stricter regulations on shift length, “which causes all airlines in Canada to add 10 to 15 per cent more pilots to fly the same schedule”; and dwindling enrolment at flight schools during the COVID-19 pandemic.
“We have this almost perfect storm that exists at this point in time,” Rousseau said. “We’re working hard with our partner, Jazz, on solving that problem right now … but it will take some time to transition.”
In spite of tens of thousands of flight delays in its second quarter, Air Canada posted earnings that soared to pre-pandemic levels amid strong travel demand and pricier fares.
It reported net income of $838 million last quarter compared with a loss of $386 million a year earlier — and nearly a billion dollars in losses through all of 2022. Revenues grew more than a third to $5.43 billion, a record for the second quarter.
“Traffic and yields were incredibly strong, especially in international markets,” said TD Cowen analyst Helane Becker in a note to clients.
High demand propelled more than 11 million customers across Air Canada’s routes in the quarter, Rousseau said. Analysts also noted higher ticket prices led to thicker profit margins. Passenger numbers grew 23 per cent year-over-year, while passenger revenues jumped 42 per cent — a disparity that speaks to the hike in fares.
Across major Canadian airlines, domestic ticket prices dropped 17 per cent from 2019 levels in June through August — to $323 on average for a one-way fare — especially on the busiest routes, according to travel data firm Hopper. But many regional flights as well as international ones outside the United States saw fares shoot up — by 18 per cent to $593 for Mexico and Central America, 30 per cent to $1,166 for Europe and 99 per cent to $2,065 for Asia.
At Air Canada, advance ticket sales rose to $5.7 billion from $5.3 billion three months earlier, with no signs of dropping off, the company said.
Canadians’ urge to travel remained unbridled by consistent delays across the airline’s network, with half of the carrier’s flights routinely arriving late or cancelled outright over the past two and a half months.
The company ranked last among North America’s 10 biggest airlines for on-time performance in July, according to a report by aviation data firm Cirium this week.
Its planes arrived punctually 51 per cent of the time, versus 62 per cent for WestJet — in seventh place. Alaska Airlines, which had a similar number of monthly flights to Air Canada’s 36,000, snagged the top spot at 82 per cent.
“Running the system hard — when things go wrong, they tend to cascade,” said Barry Prentice, who directs the University of Manitoba’s transport institute, suggesting Air Canada’s capacity is stretched thin.
Charlene Hudy, who heads the Air Line Pilots Association’s Air Canada contingent representing 4,500 employees, said the carrier is “falling short” on operations.
“We are very frustrated by those delays,” she said in a phone interview.
Hudy, whose union opted to kickstart the bargaining process in June by ending its 10-year collective agreement a year early, called on the company to close an “unacceptable” pay gap between Canadian pilots and their American counterparts — in part to bring down attrition rates.
Last quarter, Air Canada shelled out 24 per cent more year-over-year on worker compensation, due to 22 per cent growth in its full-time-equivalent employees, the company said. A 31 per cent plunge in jet fuel prices from a year earlier helped offset the cost.
With an eye toward smoother traffic flow, Rousseau once again called on the federal government to overhaul the financial model for airports, which rely on passenger fees to operate and pay rent to Ottawa — a system that failed when the stream of travellers dried up.
“The pandemic really has exposed the weakness of our user-pay model,” Rousseau said.
While U.S. airports ramped up operations earlier and never stopped receiving federal funds, Canadian ones took longer to resume post-pandemic activity and had less cash to do it with, said Prentice.
In the quarter ended June 30, Air Canada reported that operating revenues climbed 36 per cent to $5.27 billion from $3.98 billion in the same period a year earlier.
On an adjusted basis, diluted earnings hit $1.85 per share versus a loss of $1.12 per share a year prior, the Montreal-based company said Friday. The latest figure towered over analyst expectations of 68 cents per share, according to financial markets data firm Refinitiv.
Air Canada’s total long-term debt and lease liabilities fell nine per cent to $14.89 billion from $16.31 billion at the end of 2022.
Its net debt-to-adjusted earnings ratio dropped to 1.7, a major improvement from 5.1 six months earlier.
This report by The Canadian Press was first published Aug. 11, 2023.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
