Recession fears haven't deterred travelers, says Air Canada

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Recession fears haven’t deterred travelers, says Air Canada

Air Canada flew 84,643 flights and carried 9.1 million passengers in the second quarter of 2022.

Air Canada sees no red flags indicating fears of a potential recession, the rising cost of living or airport scrambles have curbed travellers'appetite.

The management of the company made this observation during the unveiling of second quarter results on Tuesday. The Montreal-based air carrier has also recorded a decrease in its net loss thanks to the rebound in demand.

Demand was strong in June and it is growing. x27;is continued during the third quarter, Chief Commercial Officer Lucie Guillemette commented during a conference call with financial analysts. At this time, we do not see any effect related to forecasts of a possible economic slowdown.

As a sign of the strength in anticipated demand, the liability for tickets sold in anticipation of travel has exceeded pre-pandemic levels. At $4.6 billion as of June 30, the amount of this liability is 24% higher than in the second quarter of 2019 (pre-pandemic).

That leaves expect heavy traffic this summer and potentially this winter, said Scotiabank analyst Konark Gupta.

Ms. Guillemette mentioned that the pace of the recovery accelerated during the month of June. She mentions that revenues increased by 15% from April to May while they increased by 25% to 30% from May to June.

The recovery is proceeding at high speed, but concerns remain over high fuel prices, said Canaccord Genuity analyst Matthew Lee. He notes that the gap between the price of a barrel of oil and jet fuel is widening. While fuel prices were around 40% higher in 2019, the gap is now close to 100%.

Air Canada has optimized its supply, but the analyst still believes that fuel costs will increase due to this discrepancy. We are projecting a 50% difference, rather than 30% in our previous forecast.

The analyst adds that the recovery is long overdue in Asia due to more severe health restrictions, particularly in China. As Asia-Pacific has historically accounted for 20% of capacity, we believe that improvement in the region is needed for the recovery to be sustainable, he comments.

The rapid resumption of air travel, however, caught the global airline industry by surprise as travelers faced long queues, delays and even cancellations.

The situation has been particularly difficult in Canada, underlined the president and chief executive officer, Michael Rousseau. We went from a near air traffic shutdown, which lasted two years, to returning capacity to almost 80% of 2019 levels in just a few months.

During the conference call, management apologized for the inconvenience experienced by travelers and employees. Air Canada believes this is a temporary situation.

“We have never seen the demand increase so strongly over such a short period.

—Craig Landry, Chief Operating Officer

The situation has improved when it comes to flight cancellations, according to a compilation by aeronautical data firm Cirium. Air Canada has canceled 7.36% of its domestic flights between July 1 and July 15. This proportion reached 10.45% at Montreal-Trudeau airport and 8.67% at Pearson airport in Toronto.

The number of domestic flights canceled decreased to 4.17%. By comparison, the carrier canceled 3.33% of its domestic flights in 2019, before the pandemic.

To give an idea of ​​the scale of the rebound, Craig Landry, chief operating officer, pointed out that the company had flown 20,603 flights and carried 1.2 million customers in the second quarter of the year. former. A year later, Air Canada operated 84,643 flights for 9.1 million passengers.

That's a fourfold increase in the number of flights and it represents almost eight times as many passengers.

For the second quarter, Air Canada disclosed a net loss of $386 million, compared to a net loss of $1.165 billion for the same period l& #x27;last year. Diluted net loss per share reached $1.60, compared to a loss of $3.31 for the same period last year.

Revenues, for their part , rose fivefold to $3.98 billion.

Prior to the earnings release, analysts had expected a net loss of 83 cents per share, according to data firm Refinitiv.

Air Canada's stock was up 14 cents, or 0.81%, at $17.53 at the close of trading. session on the Toronto Stock Exchange.

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