Air Canada is on an upward trajectory but losses continue amid high demand

Christopher Reynolds, The Canadian Press

Published Tuesday, August 2, 2022 2:13 PM EST

Last update Tuesday, August 2, 2022 2:13pm EST

With bookings soaring, Air Canada reported a nearly fivefold increase in revenue in its last quarter, but continued to post net losses in the hundreds of millions due to three “extremely tough” months, CEO Michael Russo said.

Russo’s comments come after months of global turmoil in the industry, as airlines, airports and governments struggle to deal with a massive resurgence of travel that has unleashed scenes of chaos at stations around the world and hit Air Canada’s finish line as it pushed to accommodate delayed passengers.

The airline said the summer travel season is back in full swing. CFO Lucy Guillemmet told analysts on a conference call Tuesday that pre-ticket sales in the second quarter were 94 percent of 2019 levels and remain solid, with no side effects of the economic slowdown.

Customer volume jumped to 9.1 million passengers in the quarter ended June 30, reaching 71 percent of levels compared to the same period in 2019. Passenger revenue exceeded 80 percent of 2019 levels, due in part to higher fuel costs carried over to the Passengers ; The airline spent 45 per cent more on jet fuel for the third quarter despite the flight schedule being 20 per cent lower than three years earlier.

Air Canada reported that employee numbers closed the quarter at 90 percent of pre-pandemic salaries, saying it had “doubled” in hiring and training since last fall. The airline boasted 21,300 full-time workers as of September 2021, and finished in June with 29,500.

“But despite all the planning, the increase in traffic has created difficulties for all participants in the air transport system, a situation we are witnessing around the world,” said Russo.

“We deeply regret” the disruptions the passengers experienced, he said, while Chief Operating Officer Craig Landry offered an apology for the “operational instability”.

But Landry also pointed the finger at several industry players for a string of cancellations and other hiccups, pointing to staff shortages in areas ranging from security and customs screening to food.

He added that mechanical failures in airport baggage systems have also played a role in the persistent baggage accidents that have plagued passengers in recent months.

As passengers returned to the runway – and faced nerve-racking delays – the cost of covering their hotel stays, food vouchers and delayed baggage delivery all contributed to a cost per customer that exceeded Air Canada’s expectations.

Robert Kokounis, president of consulting firm AirTrav Inc. Toronto-based: “There was a lot of money being paid either to re-accommodate the passengers or to take care of them.”

“Anyone who touches Pearson, Montreal, to a lesser degree Vancouver, it’s a disaster.”

A difficult summer escalation has propelled Air Canada and Toronto’s Pearson Airport to the top of global flight delay lists, with Canada’s largest airline often hitting the number one spot for delayed flights – up to two-thirds of flights scheduled on some days – in June and early July.

However, its performance has improved significantly in the past four weeks after the company scaled back its ambitious recovery plans and cut more than 15 percent of its scheduled flights in July and August, affecting hundreds of thousands of customers.

Guillemet said that while leisure travel is back in force, corporate travel has been slower to come back, jumping from 40 percent of pre-pandemic volumes in March to more than 60 percent by the end of June.

Demand in both regions fell sharply in March 2020 after COVID-19 border restrictions brought the aviation world to a bustling halt.

Until July 5 last year, fully vaccinated Canadians had to self-quarantine for at least eight days upon arrival, and until April 2022 they had to submit a negative COVID-19 test to enter the country.

Americans who were fully vaccinated could not cross the border for non-essential reasons until August 9, 2021, a measure that was lifted for nationals of other countries four weeks later.

On Tuesday, Air Canada reported a second-quarter loss of $386 million compared to a loss of $1.17 billion a year earlier, when widespread travel restrictions were still in place. Total revenue was $3.98 billion, compared to $837 million during the same period last year, an increase of 375 percent.

The Montreal-based carrier said its loss for the three months ended June 30 was $1.60 per diluted share, compared to a loss of $3.31 per diluted share in the second quarter of 2021.

The result fell 94 percent from analysts’ expectations of 83 cents per diluted share of losses, according to financial data firm Refinitiv.

This report was first published by The Canadian Press on August 2, 2022.

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