Air Canada today reported its 2019 third quarter results which include record third-quarter operating revenues of approximately $5.6 billion, with operating income reaching $956 million compared to third quarter 2018 operating income of $923 million. Canada’s flag carrier also achieved EBITDA of approximately $1.5 billion, up nine per cent over the prior year’s third quarter.
The airline beat its July 30 projected EBITDA increase of five per cent, noting the better than expected results were primarily driven by a lower fuel price per litre than what Air Canada had previously assumed in its guidance.
“I am pleased to report an excellent third quarter for Air Canada, in which we generated record operating revenues of close to $5.6 billion and reached record liquidity of nearly $7.4 billion,” said Calin Rovinescu, president and CEO of Air Canada. “Impressive as such strong results are on their own, they are even more meaningful given that we achieved them despite the serious disruption to our operations and to our cost structure created by the Boeing 737 MAX grounding.”
Rovinescu points out Air Canada has managed the “extremely challenging 737 MAX grounding” for nearly eight months. The airline recently adjusted its schedule to remove the aircraft until February 14, 2020, and is wet leasing two Airbus A330 aircraft to ensure there is enough capacity for the upcoming winter schedule.
“However, the removal of a scheduled 36 737 MAX aircraft during our peak summer season exacted a toll from a financial, route, product, and human resources perspective and the grounding is preventing us from realizing our full potential,” he said. Rovinescu continues to explain Air Canada has not yet adjusted its long-term financial targets, because of the grounding.
Rovinescu also applauded the third-quarter 95 per cent approval by Transat A.T. shareholders to proceed with Air Canada’s definitive acquisition agreement, which remains subject to regulatory approvals. In releasing its 2019 third quarter results, Air Canada also highlighted that it has started to consolidate Aeroplan’s financial results on the date of the acquisition of Aeroplan, January 10, 2019.
On a capacity reduction of 2.1 per cent, Air Canada notes it recorded third quarter system passenger revenues of approximately $5.2 billion – an increase of 2.9 per cent over the same quarter in 2018. Air Canada notes this increase in system passenger revenues was driven by a yield improvement of 4.8 per cent, partly offset by a traffic decrease of 1.8 per cent. This speaks to the company’s management of the 737 MAX grounding, as well as a generally improved pricing environment, mainly in North America, and additional revenues from Aeroplan flight redemptions.
In the third quarter of 2019, operating expenses of $4.597 billion increased $105 million or two per cent from the third quarter of 2018. Air Canada’s cost per available seat mile (CASM) increased 4.5 per cent from the third quarter of 2018. The airline’s adjusted CASM increased 9.3 per cent over the same quarter in 2018. Air Canada notes these increases reflected, in large part, the impact of the Boeing 737 MAX aircraft grounding.