MONTREAL — Air Canada beat expectations by bleeding less cash in its latest quarter, a sign that the airline’s underlying recovery remains on track despite the hit to vacation travel caused by the Omicron variant.
However, a loss of nearly $500 million has prompted the carrier’s CEO to call for lighter travel restrictions, three days after the federal government announced it would lower major barriers to cross-border traffic.
“More needs to be done,” chief executive Michael Rousseau said, demanding an end to all COVID-19 testing rules before departure.
“If bars and large public events can reopen at full capacity, and some provinces like Quebec and Ontario can end the vaccination passport, there is no reason to single out travel.”
On Tuesday, the federal health minister said Canada would lift its blanket travel advisory and requirement for pre-departure COVID-19 molecular testing from February 28 – although potentially cheaper and easier rapid antigen tests access will be mandatory. Unvaccinated children under 12 also no longer need to self-isolate upon returning home.
The advisory against overseas travel came into effect in mid-December in response to the Omicron strain, which reversed the upward trajectory of airlines around the world.
“We were experiencing strong growth before the arrival of Omicron. Then it was almost a very quiet period for a month, a month and a half, with a lot of cancellations,” Michael Rousseau told analysts on Friday.
“But over the last month or so, we’ve started to see strong growth, strong momentum in bookings.”
The country’s largest airline has canceled 36% of its January flights, based on the number expected in mid-October. By January 28, it had canceled almost half of its February flights, according to flight data company Cirium. By the end of last month, more than 43,300 trips had been cut in the first two months of 2022.
Business travel – a key market that generates high profit margins for carriers – also continues to lag as many companies delay return-to-work policies, although signs of growth are emerging.
“We are seeing – very slowly – but we are seeing progress week after week,” said commercial director Lucie Guillemette. “We’re just looking forward to seeing the trend take a bit of a sharper turn here.”
Fourth-quarter adjusted earnings were “modest” but positive for the first time in seven quarters, Rousseau noted. The company reduced its net loss by 60% year over year. And passenger revenue rose $1.6 billion to more than four times the year-ago period as flight volumes soared in October and November compared to 2020.
Cargo revenue also helped offset Air Canada’s losses, jumping 163% to $490 million from the same period a year earlier.
As e-commerce sales and demand for delivery services continued to rise, the airline launched its first dedicated Boeing 767 freighter in December, with three more expected to take off this year.
Rousseau said strong advance ticket sales, which grew by nearly $400 million in the quarter, give the company confidence that passengers will return and that Omicron has postponed, not canceled. , travel.
Jet fuel posed a threat to profit margins. Spending more than tripled from the end of 2020 due to more travel as well as a 67% increase in the price of jet fuel, chief financial officer Amos Kazzaz said.
Despite more expensive hydrocarbons and expected interest rate hikes, the dismantling of travel restrictions in Canada and around the world bodes well for Air Canada.
“The entire Canadian airline and travel industry will really turn the page this year, supported by rapidly strengthening demand for air travel,” Robert Kokonis, president of consulting firm AirTrav Inc., said in a statement. an email.
On Friday, Air Canada announced a net loss of $493 million or $1.38 per diluted share in the fourth quarter, compared to a net loss of $1.16 billion or $3.91 per diluted share a year earlier.
The Montreal-based company’s operating revenue for the quarter ended Dec. 31 was $2.73 billion, more than triple the $827 million recorded in the same period of 2020.
Analysts polled by financial data firm Refinitiv had expected Air Canada to post revenue of $2.43 billion and a loss of $539 million.
This report from The Canadian Press was first published on February 18, 2022.
Companies in this story: (TSX:AC)