Air Canada Reports Third Quarter 2024 Financial Results

PR Newswire

MONTREAL, Nov. 1, 2024

   -- Third quarter operating revenues of $6.1 billion decreased 4% year over 
      year. 
 
   -- Third quarter operating income of $1.040 billion and adjusted EBITDA* of 
      $1.523 billion decreased $375 million and $307 million year over year, 
      respectively. 
 
   -- Generated cash flows from operating activities of $737 million and free 
      cash flow* of $282 million in the quarter, a year-over-year increase of 
      $329 million and $147 million, respectively. 
 
   -- Leverage ratio* of 1.0 as at September 30, 2024, compared to 1.1 at end 
      of 2023. 
 
   -- Normal course issuer bid announced. 

MONTREAL, Nov. 1, 2024 /PRNewswire/ - Air Canada today reported its third quarter 2024 financial results.

"Air Canada reported solid results for the third quarter on key metrics, with operating revenues of $6.1 billion and operating income of $1 billion. Adjusted EBITDA of $1.5 billion and our adjusted earnings per share of $2.57 were both ahead of market expectations. We delivered on our ongoing operational improvement program, with quarterly on-time performance rising eight percentage points over the same period in 2023. I thank all our employees for their care and dedication in safely moving nearly 13 million customers in the quarter, including our Olympic and Paralympic athletes to the summer games in Paris," said Michael Rousseau, President and Chief Executive of Air Canada.

"Summer is our peak season and this year our pilot contract negotiations added complexity. We proactively offered options and flexibility to customers, and I am proud that we concluded a mutually beneficial agreement without significant disruption to customers and with a contained revenue impact. I thank our customers for their loyalty and reiterate our promise to keep providing industry-leading products and services to them.

"The demand environment remains favourable. We have adjusted our full year guidance and underlying assumptions to account for the evolution of the fuel price environment and for certain contract-related adjustments. We are delivering on our commitments and are confident in our future. We are now announcing a new share buyback program, addressing some of the dilution experienced from financing decisions necessary during the pandemic, and returning value to shareholders. This additional step, after paying down our debt and funding our growth, is consistent with our capital allocation roadmap and our strategic plan, which we will detail at our Investor Day on December 17, 2024," said Mr. Rousseau.

 
(*) Adjusted CASM, adjusted EBITDA (earnings before interest, taxes, 
depreciation, and amortization), adjusted EBITDA margin, leverage ratio, net 
debt, adjusted pre-tax income (loss), adjusted net income (loss), adjusted 
earnings (loss) per share, and free cash flow are referred to in this news 
release. Such measures are non-GAAP financial measures, non-GAAP ratios, or 
supplementary financial 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 
these measures, and for a reconciliation of Air Canada non-GAAP measures used 
in this news release to the most comparable GAAP financial measure. 
 

Third Quarter 2024 Financial Results

The following is an overview of Air Canada's results of operations and financial position for the third quarter 2024 compared to the third quarter 2023.

   -- Operating revenues of $6.106 billion decreased $238 million or 4%, 
      resulting from lower passenger revenues. 
 
   -- Operated capacity increased 3%, lower than the capacity guidance of 
      4%-4.5% increase communicated in Air Canada's news release dated August 
      7, 2024. This was primarily due to fleet constraints and to adjustments 
      made to the operating schedule. 
 
   -- Operating expenses of $5.066 billion increased $137 million or 3%. The 
      increase was largely due to higher costs in most line items due to 
      capacity growth and was partially offset by certain contract-related 
      adjustments recorded this quarter. 
 
   -- Operating income of $1.040 billion, with an operating margin of 17.0%, 
      declined $375 million. 
 
   -- Adjusted EBITDA of $1.523 billion, with an adjusted EBITDA margin* of 
      24.9%, declined $307 million. 
 
   -- Net income of $2.035 billion, which included a favourable tax asset 
      recognition of $1.154 billion, and diluted earnings per share of $5.38 
      compared to $1.250 billion and $3.08 per diluted share, respectively. 
 
   -- Adjusted net income* of $969 million and adjusted earnings per diluted 
      share* of $2.57, compared to $1.281 billion and $3.41 per diluted share, 
      respectively. 
 
   -- Adjusted CASM* of 12.15 cents decreased 0.4%, primarily due to the impact 
      of contract-related adjustments recorded in the third quarter of 2024. 
 
   -- Net cash flows from operating activities of $737 million increased $329 
      million. 
 
   -- Free cash flow* of $282 million increased $147 million. 
 
   -- Net debt-to-adjusted EBITDA ratio* (leverage ratio) was 1.0 at September 
      30, 2024, compared to 1.1 at December 31, 2023. 

Outlook

For the full year 2024, Air Canada is updating its guidance to account for updated expectations of jet fuel prices and the impact of contract-related cost adjustments. Full year 2024 guidance is as follows:

 
    Metric               2024 Guidance               Prior 2024 Guidance 
---------------  -----------------------------  ------------------------------ 
ASM capacity     Approximately 5% increase      5.5% to 6.5% increase versus 
                 versus 2023                    2023 
---------------  -----------------------------  ------------------------------ 
Adjusted CASM    Approximately 2% increase      2.5% to 3.5% increase versus 
                 versus 2023                    2023 
---------------  -----------------------------  ------------------------------ 
Adjusted EBITDA  Approximately $3.5 billion     $3.1 billion to $3.4 billion 
---------------  -----------------------------  ------------------------------ 
 

Major Assumptions

Air Canada made assumptions in providing its guidance--including moderate Canadian GDP growth for 2024. Air Canada also assumes that the Canadian dollar will trade, on average, at C$1.36 per U.S. dollar for the full year 2024 and that the price of jet fuel will average C$1.00 per litre for the full year 2024.

Normal Course Issuer Bid

Air Canada is also announcing today that the Toronto Stock Exchange ("TSX") has accepted notice of its intention to make a normal course issuer bid ("NCIB") allowing it to purchase for cancellation up to 35,783,842 of its Class A variable voting shares and Class B voting shares (collectively the "Shares") in accordance with the rules of the TSX.

Air Canada believes that purchases of Shares under the NCIB will allow it to address some of the shareholder dilution experienced from financing decisions necessary during the pandemic. Air Canada further believes that the market price of its Shares from time to time may not fully reflect the underlying value of its business and future business prospects. In such circumstances, the purchase of Shares under the NCIB may be an attractive and appropriate use of its available cash, consistent with Air Canada's priority of investing in its growth, maintaining balance sheet strength and generating shareholder value through a balanced capital allocation strategy.

Air Canada is authorized by the TSX to purchase up to 35,783,842 Shares under the NCIB, being about 10% of the public float of its Shares. As at October 22, 2024, the number of outstanding Shares totalled 358,493,006, of which 357,838,424 Shares represented the public float. Purchases under the NCIB are authorized during the period from November 5, 2024 to November 4, 2025. Decisions regarding the amount and timing of purchases of Shares will be based on market conditions, share price and other factors. Air Canada may elect to modify, suspend or discontinue the NCIB at any time.

Purchases will be made through open market transactions on the TSX or Canadian alternative trading systems, if eligible, or such other means as securities regulatory authorities may allow, including block purchases, pre-arranged crosses or exempt offers, as well as private agreements under an issuer bid exemption order issued by a securities regulatory authority. Air Canada will pay the market price at the time of acquisition for any Share purchased, plus brokerage fees, or such other price as may be allowed. Any purchases made under an issuer bid exemption order would be at a discount to the prevailing market price of the Shares or otherwise in accordance with the terms of the order.

Within the past 12 months, Air Canada has not purchased any of its Shares. The average daily trading volume ("ADTV") of the Shares on the TSX was 2,143,460 Shares for the six-month period ended September 30, 2024. Under TSX rules, Air Canada may accordingly purchase up to 535,865 Shares on the TSX on any trading day, being 25% of the ADTV. Air Canada may also, once weekly, purchase a block of Shares not directly or indirectly owned by insiders, which may exceed such daily limit, in accordance with TSX rules. All Shares purchased pursuant to the NCIB will be cancelled.

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November 01, 2024 06:00 ET (10:00 GMT)