(Montreal) Air Canada revealed a larger-than-expected loss while spending on aircraft maintenance and labor jumped.
Posted at 7:03 a.m.
Updated at 11:25 a.m.
Stéphane Rolland
The Canadian Press
Operating expenses increased 6% to 5.2 billion in the first quarter. “Our expenses have grown faster than our capacity,” said Chief Financial Officer John Di Bert in a conference call with financial analysts on Thursday.
He mentioned that salary expenses increased by 21% compared to last year due to compensation-related initiatives and an increase in headcount linked to increased capacity. Technology spending, for its part, is up 27%.
Supply chain disruptions in the aerospace industry, including more frequent maintenance related to Pratt & Whitney’s engines, are putting pressure on the Montreal company’s costs. Aircraft maintenance costs jumped 21%.
“Our situation is similar to those of other airlines,” said President and CEO Michael Rousseau. Right now we have maybe six to seven aircraft grounded. The situation could change over time. »
Air Canada has indicated that it is seeking compensation from Pratt & Whitney. “We hope we can recover some of that (costs related to the engine problems) in the near future. »
Transat AT is also experiencing issues with Pratt & Whitney engines. At the end of April, its president and CEO, Annick Guérard, said the company wanted compensation. “We hope to reach an agreement by the end of the year. »
Pratt & Whitney had not reacted to Air Canada’s comments this morning. The Canadian Press also contacted the supplier about Transat’s efforts at the end of April and did not receive a response.
Air Canada is also negotiating with Boeing to conclude a lease contract for 737 MAX 8 aircraft, for entry into service in 2025. “We see the possibility of increasing our capacity in a profitable manner,” explained Mr. Rousseau. […] This is also a defensive decision, as we are having difficulties with the Airbus A220 engines (manufactured by Pratt & Whitney). »
Resumption of business travel
Air Canada management is also observing an increase in business customers. Business travel experienced a much later recovery than air tourism after travel was halted during the pandemic.
Network planning manager Mark Galardo has seen early signs of a recovery in business travel. “It was relatively stable in the first quarter. We haven’t seen the rebound that some of the US airlines have seen. With the end of the quarter and the current quarter, we’re seeing some really encouraging signs. »
He mentioned growth of 10% to 12% compared to last year. “It’s still early to declare victory, but it’s very encouraging. »
Galardo added that demand appeared to be coming from the technology and transportation sectors.
Results below expectations
Air Canada’s results disappointed investors as the airline revealed a larger-than-expected loss.
Despite these headwinds, National Bank Financial analyst Cameron Doerksen emphasizes that demand remains strong when we look at the 5.4 billion accumulated in reservations at the end of the quarter.
“We believe investors are already pricing in a significant slowdown in demand and deterioration in earnings, which we simply don’t see at this point,” comments Mr. Doerksen.
The company recorded a loss of 81 million, compared to a profit of 4 million in the same period last year. The adjusted diluted net loss per share was 27 cents. Revenues, for their part, increased by 7% to 5.2 billion.
Before the results were released, analysts expected a loss per share of 7 cents and revenue of 5.18 billion, according to financial data firm Refinitiv.
Air Canada shares lost $1.53, or 7.48%, to $18.93 in the morning on the Toronto Stock Exchange.
Company in this report: (TSX: AC)
