The carrier reports an operating income of $802 million, with an operating margin of 14.8%, compared to an operating loss of $253 million in the second quarter of 2022. Second quarter net cash flows from operating activities of $1.490 billion, and free cash flow* of $965 million
Michael Rousseau, President and Chief Executive Officer of Air Canada explains: "Air Canada's second-quarter results were driven by strong demand and show the effectiveness of our plan. As a result of the hard work of our people, the appeal of our growing global network, as well as our leading brand and product offering, operating revenues in the quarter reached $5.4 billion, an increase of 36 per cent from a year ago. Operating income was $802 million, a year-over-year improvement of over $1 billion, and our adjusted EBITDA reached $1.2 billion with an adjusted EBITDA margin of 22.5 per cent,"
"I thank the entire team for its continued dedication to serving our customers, including collaborating with our partners, who also share the responsibility of ensuring a smooth customer journey. We safely carried over 11 million customers across our global network in the quarter, a year-over-year increase of about 23 per cent. However, despite having more trained resources than last summer and improved tools, our operations in June and July were not at expected levels. We are increasing our efforts to protect the customer journey from disruption, regardless of the cause. This includes using any influence we have, in such instances as pilot attrition at our principal regional partner or global supply chain issues, or working to mitigate the effects of situations beyond our control, such as disruptive storm activity in our key hubs and markets. We are confident that our efforts will generate positive outcomes.
"We are particularly pleased with our international performance, propelling nearly 70 per cent of the year-over-year increase in passenger revenues. Air Canada Vacations continued to see high demand for leisure travel packages, and Aeroplan added compelling new partners and grew its membership. Our cargo business, like others in the industry, experienced lower demand and yields than expected. Based on current passenger booking patterns, we see prevailing strength in travel demand over the second half of 2023, giving us confidence to increase the lower end of our adjusted EBITDA guidance range. We continue to focus intently on cost discipline and liquidity management. We ended the quarter with more than $9.6 billion in cash, cash equivalents and investments. This will enable us to further invest in our business, deleverage our balance sheet and ensure our company maintains the resiliency and adaptability needed for long-term success and to navigate through evolving market conditions," said Mr. Rousseau.
Second Quarter 2023 Financial Results
- Second quarter operating revenues of $5.427 billion increased $1.446 billion from the same quarter in 2022, driven by a 42 per cent year-over-year increase in passenger revenues. Operated capacity increased 21 per cent from the second quarter of 2022, one percentage point lower than the projection provided in Air Canada's May 12, 2023, news release.
- Operating expenses of $4.625 billion increased $391 million or 9 per cent from the second quarter of 2022, driven by increases in nearly all line items reflecting higher operated capacity and traffic year –over year, partially offset by a 31.4 per cent decrease in jet fuel prices.
- Operating income of $802 million, with an operating margin of 14.8 per cent, an improvement of over $1 billion from an operating loss of $253 million in the second quarter of 2022.
- Adjusted EBITDA of $1.220 billion, with an adjusted EBITDA margin of 22.5 per cent, an increase of $1.066 billion and of 18.6 percentage points, respectively, from the second quarter of 2022.
- Net income of $838 million improved $1.224 billion from the second quarter of 2022. Diluted earnings per share of $2.34 compared to a diluted loss per share of $1.60 in the second quarter of 2022.
- Adjusted net income* of $664 million improved $1.119 billion from the second quarter of 2022. Adjusted earnings per diluted share* of $1.85 compared to an adjusted loss per diluted share of $1.12 in the second quarter of 2022, an improvement of $2.97 per diluted share.
- Adjusted CASM* (adjusted cost per available seat mile) of 13.3 cents increased 1.6 per cent from the second quarter of 2022. The unit cost was impacted by higher passenger service costs due to higher traffic and higher selling costs, which are largely driven by revenues, and by a 24 per cent increase in wages, salaries and benefits resulting from a 22 per cent year-over-year increase in the number of average full-time-equivalent (FTE) employees. Second quarter 2023 CASM of 18.8 cents decreased 9.7 per cent from the second quarter of 2022 mainly due to lower fuel prices and higher capacity year over year.
- Net cash flows from operating activities of $1.490 billion increased $426 million from the second quarter of 2022.
- Free cash flow of $965 million increased $537 million from the second quarter of 2022.
- Net debt-to-adjusted EBITDA ratio* was 1.7 at June 30, 2023, an improvement from 3.2 at March 30, 2023, and 5.1 at December 31, 2022, due to growth in adjusted EBITDA and the reduction in net debt.
Selected Financial Metrics and Statistics
The financial and operating highlights for Air Canada for the periods indicated are as follows:
(Canadian dollars in millions, except per share data or | Second Quarter | First Six Months | ||||
Financial Performance Metrics | 2023 | 2022 | $ Change | 2023 | 2022 | $ Change |
Operating revenues | 5,427 | 3,981 | 1,446 | 10,314 | 6,554 | 3,760 |
Operating profit (loss) | 802 | (253) | 1,055 | 785 | (803) | 1,588 |
Operating margin (1) (%) | 14.8 | (6.4) | 21.2 pp (8) | 7.6 | (12.3) | 19.9 pp |
Adjusted EBITDA (2) | 1,220 | 154 | 1,066 | 1,631 | 11 | 1,620 |
Adjusted EBITDA margin (2) (%) | 22.5 | 3.9 | 18.6 pp | 15.8 | 0.2 | 15.6 pp |
Net income (loss) before income taxes | 796 | (352) | 1,148 | 773 | (1,166) | 1,939 |
Net income (loss) | 838 | (386) | 1,224 | 842 | (1,360) | 2,202 |
Adjusted pre-tax income (loss) (2) | 656 | (447) | 1,103 | 462 | (1,187) | 1,649 |
Adjusted net income (loss) (2) | 664 | (455) | 1,119 | 476 | (1,202) | 1,678 |
Total liquidity (3) | 10,551 | 10,694 | (143) | 10,551 | 10,694 | (143) |
Net cash flows from operating activities | 1,490 | 1,064 | 426 | 2,927 | 1,431 | 1,496 |
Free cash flow (2) | 965 | 428 | 537 | 1,952 | 519 | 1,433 |
Net debt (2) | 5,330 | 6,842 | (1,512) | 5,330 | 6,842 | (1,512) |
Diluted earnings (loss) per share | 2.34 | (1.60) | 3.94 | 2.35 | (3.80) | 6.15 |
Adjusted earnings (loss) per share – diluted (2) | 1.85 | (1.12) | 2.97 | 1.33 | (3.36) | 4.69 |
Operating Statistics (4) | 2023 | 2022 | % Change | 2023 | 2022 | % Change |
Revenue passenger miles (RPMs) (millions) | 21,617 | 16,371 | 32.0 | 40,195 | 25,852 | 55.5 |
Available seat miles (ASMs) (millions) | 24,606 | 20,331 | 21.0 | 46,513 | 34,628 | 34.3 |
Passenger load factor % | 87.9 % | 80.5 % | 7.3 pp | 86.4 % | 74.7 % | 11.8 pp |
Passenger revenue per RPM (Yield) (cents) | 22.7 | 21.0 | 7.9 | 22.4 | 20.7 | 8.0 |
Passenger revenue per ASM (PRASM) (cents) | 19.9 | 16.9 | 17.7 | 19.3 | 15.5 | 24.9 |
Operating revenue per ASM (TRASM) (cents) | 22.1 | 19.6 | 12.7 | 22.2 | 18.9 | 17.2 |
Operating expense per ASM (CASM) (cents) | 18.8 | 20.8 | (9.7) | 20.5 | 21.2 | (3.6) |
Adjusted CASM (cents) (2) | 13.3 | 13.1 | 1.6 | 13.9 | 14.1 | (1.7) |
Average number of full-time-equivalent (FTE) | 35.9 | 29.5 | 21.7 | 35.2 | 28.4 | 23.8 |
Aircraft in operating fleet at period-end | 354 | 342 | 4 | 354 | 342 | 4 |
Seats dispatched (thousands) | 13,390 | 11,744 | 14.0 | 25,683 | 20,397 | 25.9 |
Aircraft frequencies (thousands) | 93.5 | 86.0 | 8.8 | 178.7 | 151.0 | 18.3 |
Average stage length (miles) (6) | 1,838 | 1,731 | 6.1 | 1,811 | 1,698 | 6.7 |
Fuel cost per litre (cents) | 101.1 | 147.3 | (31.4) | 114.2 | 126.1 | (9.4) |
Fuel litres (thousands) | 1,162,714 | 983,688 | 18.2 | 2,229,799 | 1,744,550 | 27.8 |
Revenue passengers carried (thousands) (7) | 11,287 | 9,145 | 23.4 | 21,256 | 14,580 | 45.8 |
(1) | Operating margin is a supplementary financial measure and is defined as operating income (loss) as a percentage of operating revenues. |
(2) | Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), adjusted EBITDA margin, adjusted pre-tax income (loss), adjusted net income (loss), free cash flow, net debt, adjusted earnings (loss) per share, and adjusted CASM are non-GAAP financial measures, capital management measures, non-GAAP ratios or supplementary financial measures. Such 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 section "Non-GAAP Financial Measures" of this news release for descriptions of Air Canada's non-GAAP financial measures and for a quantitative reconciliation of Air Canada's non-GAAP financial measures to the most comparable GAAP measure. |
(3) | Total liquidity refers to the sum of cash, cash equivalents, short- and long-term investments and the amounts available under Air Canada's credit facilities. Total liquidity, as at June 30, 2023, of $10,551 million consisted of $9,556 million in cash, cash equivalents, short- and long-term investments and $995 million available under undrawn credit facilities. As at June 30, 2022, total liquidity of $10,694 million consisted of $9,722 million in cash and cash equivalents, short- and long-term investments, and $972 million available under undrawn credit facilities. Cash and cash equivalents also include funds ($189 million as at June 30, 2023, and $186 million as at June 30, 2022) held in trust by Air Canada Vacations in accordance with regulatory requirements governing advance sales for tour operators. |
(4) | Except for the reference to average number of FTE employees, operating statistics in this table include Jazz operating under its capacity purchase agreement with Air Canada. |
(5) | Reflects average FTE employees at Air Canada and its subsidiaries. Excludes FTE employees at Jazz, operating under the capacity purchase agreements with Air Canada. |
(6) | Average stage length is calculated by dividing the total number of available seat miles by the total number of seats dispatched. |
(7) | Revenue passengers are counted on a flight number basis (rather than by journey/itinerary or by leg) which is consistent with the IATA definition of revenue passengers carried. |
(8) | "pp" denotes percentage points and refers to a measure of the arithmetic difference between two percentages. |