Air Canada Reports Third Quarter 2024 Financial Results
- Third quarter operating revenues of
$6.1 billion decreased 4% year over year. - Third quarter operating income of
$1.040 billion and adjusted EBITDA* of$1.523 billion decreased$375 million and$307 million year over year, respectively. - Generated cash flows from operating activities of
$737 million and free cash flow* of$282 million in the quarter, a year-over-year increase of$329 million and$147 million , respectively. - Leverage ratio* of 1.0 as at
September 30, 2024 , compared to 1.1 at end of 2023. - Normal course issuer bid announced.
"
"Summer is our peak season and this year our pilot contract negotiations added complexity. We proactively offered options and flexibility to customers, and I am proud that we concluded a mutually beneficial agreement without significant disruption to customers and with a contained revenue impact. I thank our customers for their loyalty and reiterate our promise to keep providing industry-leading products and services to them.
"The demand environment remains favourable. We have adjusted our full year guidance and underlying assumptions to account for the evolution of the fuel price environment and for certain contract-related adjustments. We are delivering on our commitments and are confident in our future. We are now announcing a new share buyback program, addressing some of the dilution experienced from financing decisions necessary during the pandemic, and returning value to shareholders. This additional step, after paying down our debt and funding our growth, is consistent with our capital allocation roadmap and our strategic plan, which we will detail at our Investor Day on
*
Adjusted
CASM, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), adjusted EBITDA margin, leverage ratio, net debt, adjusted pre-tax income (loss), adjusted net income (loss), adjusted earnings (loss) per share, and free cash flow are referred to in this news release. Such measures are non-GAAP financial measures, non-GAAP ratios, or supplementary financial 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 the "Non-GAAP Financial Measures" section of this news release for descriptions of these measures, and for a reconciliation of |
Third Quarter 2024 Financial Results
The following is an overview of
- Operating revenues of
$6.106 billion decreased$238 million or 4%, resulting from lower passenger revenues. - Operated capacity increased 3%, lower than the capacity guidance of 4%-4.5% increase communicated in
Air Canada's news release datedAugust 7, 2024 . This was primarily due to fleet constraints and to adjustments made to the operating schedule. - Operating expenses of
$5.066 billion increased$137 million or 3%. The increase was largely due to higher costs in most line items due to capacity growth and was partially offset by certain contract-related adjustments recorded this quarter. - Operating income of
$1.040 billion , with an operating margin of 17.0%, declined$375 million . - Adjusted EBITDA of
$1.523 billion , with an adjusted EBITDA margin* of 24.9%, declined$307 million . - Net income of
$2.035 billion , which included a favourable tax asset recognition of$1.154 billion , and diluted earnings per share of$5.38 compared to$1.250 billion and$3.08 per diluted share, respectively. - Adjusted net income* of
$969 million and adjusted earnings per diluted share* of$2.57 , compared to$1.281 billion and$3.41 per diluted share, respectively. - Adjusted CASM* of
12.15 cents decreased 0.4%, primarily due to the impact of contract-related adjustments recorded in the third quarter of 2024. - Net cash flows from operating activities of
$737 million increased$329 million . - Free cash flow* of
$282 million increased$147 million . - Net debt-to-adjusted EBITDA ratio* (leverage ratio) was 1.0 at
September 30, 2024 , compared to 1.1 atDecember 31, 2023 .
Outlook
For the full year 2024,
Metric |
2024 Guidance |
Prior 2024 Guidance |
ASM capacity |
Approximately 5% increase versus 2023 |
5.5% to 6.5% increase versus 2023 |
Adjusted CASM |
Approximately 2% increase versus 2023 |
2.5% to 3.5% increase versus 2023 |
Adjusted EBITDA |
Approximately |
|
Major Assumptions
Normal Course Issuer Bid
Purchases will be made through open market transactions on the TSX or Canadian alternative trading systems, if eligible, or such other means as securities regulatory authorities may allow, including block purchases, pre-arranged crosses or exempt offers, as well as private agreements under an issuer bid exemption order issued by a securities regulatory authority.
Within the past 12 months,
Non-GAAP Financial Measures
Below is a description of certain non-GAAP financial measures and ratios used by
A charge of
Adjusted CASM
In calculating adjusted CASM, aircraft fuel expense is excluded from operating expense results as it fluctuates widely depending on many factors, including international market conditions, geopolitical events, jet fuel refining costs and
Adjusted CASM is reconciled to GAAP operating expense as follows:
(Canadian dollars in millions, except where indicated) |
Third Quarter |
First Nine Months |
||||||||||
2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||
Operating expense – GAAP |
$ |
5,066 |
$ |
4,929 |
$ |
137 |
$ |
15,334 |
$ |
14,458 |
$ |
876 |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft fuel |
|
(1,377) |
|
(1,365) |
|
(12) |
|
(3,964) |
|
(3,927) |
|
(37) |
Ground package costs |
|
(102) |
|
(99) |
|
(3) |
|
(574) |
|
(543) |
|
(31) |
Freighter costs (excluding fuel) |
|
(40) |
|
(41) |
|
1 |
|
(113) |
|
(111) |
|
(2) |
Provision for contractual lease obligations |
|
(34) |
|
- |
|
(34) |
|
(34) |
|
- |
|
(34) |
Operating expense, adjusted for the above-noted items |
$ |
3,513 |
$ |
3,424 |
$ |
89 |
|
10,649 |
|
9,877 |
|
772 |
ASMs (millions) |
|
28,892 |
|
28,060 |
|
3.0 % |
|
79,432 |
|
74,573 |
|
6.5 % |
Adjusted CASM (cents) |
¢ |
12.15 |
¢ |
12.20 |
¢ |
(0.05) |
¢ |
13.41 |
¢ |
13.24 |
¢ |
0.17 |
EBITDA and Adjusted EBITDA
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) is commonly used in the airline industry and is used by
Adjusted EBITDA margin (adjusted EBITDA as a percentage of operating revenues) is commonly used in the airline industry and is used by
Adjusted EBITDA and adjusted EBITDA margin are reconciled to GAAP operating income (loss) as follows:
|
Third Quarter |
First Nine Months |
||||||||||
(Canadian dollars in millions, except where indicated) |
2024 |
2023 |
Change |
2024 |
2023 |
Change |
||||||
Operating income – GAAP |
$ |
1,040 |
$ |
1,415 |
$ |
(375) |
$ |
1,517 |
$ |
2,200 |
$ |
(683) |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
449 |
|
415 |
|
34 |
|
1,339 |
|
1,261 |
|
78 |
EBITDA |
|
1,489 |
|
1,830 |
|
(341) |
|
2,856 |
|
3,461 |
|
(605) |
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for contractual lease obligations |
|
34 |
|
- |
|
34 |
|
34 |
|
- |
|
34 |
Adjusted EBITDA |
$ |
1,523 |
$ |
1,830 |
$ |
(307) |
$ |
2,890 |
$ |
3,461 |
$ |
(571) |
Operating revenues |
$ |
6,106 |
$ |
6,344 |
$ |
(238) |
$ |
16,851 |
$ |
16,658 |
$ |
193 |
Operating margin (%) |
|
17.0 |
|
22.3 |
|
(5.3) pp |
|
9.0 |
|
13.2 |
|
(4.2) pp |
Adjusted EBITDA margin (%) |
|
24.9 |
|
28.8 |
|
(3.9) pp |
|
17.2 |
|
20.8 |
|
(3.6) pp |
Adjusted Pre-tax Income (Loss)
Adjusted pre-tax income (loss) is used by
Adjusted pre-tax income (loss) is reconciled to GAAP income (loss) before income taxes as follows:
(Canadian dollars in millions) |
Third Quarter |
First Nine Months |
||||||||||
2024 |
2023 |
$ Change |
2024 |
2023 |
$ Change |
|||||||
Income before income taxes – GAAP |
$ |
897 |
$ |
1,317 |
$ |
(420) |
$ |
1,236 |
$ |
2,090 |
$ |
(854) |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for contractual lease obligations |
|
34 |
|
- |
|
34 |
|
34 |
|
- |
|
34 |
Foreign exchange (gain) loss |
|
85 |
|
61 |
|
24 |
|
28 |
|
(317) |
|
345 |
Net interest relating to employee benefits |
|
(5) |
|
(6) |
|
1 |
|
(16) |
|
(18) |
|
2 |
Gain on financial instruments recorded at fair value |
|
(26) |
|
(101) |
|
75 |
|
(66) |
|
(24) |
|
(42) |
Loss on debt settlement |
|
- |
|
7 |
|
(7) |
|
46 |
|
9 |
|
37 |
Adjusted pre-tax income |
$ |
985 |
$ |
1,278 |
$ |
(293) |
$ |
1,262 |
$ |
1,740 |
$ |
(478) |
Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share – Diluted
Adjusted net income (loss) and adjusted earnings (loss) per share are reconciled to GAAP net income as follows:
(Canadian dollars in millions) |
Third Quarter |
First Nine Months |
||||||||||
2024 |
2023 |
$ Change |
2024 |
2023 |
$ Change |
|||||||
Net income – GAAP |
$ |
2,035 |
$ |
1,250 |
$ |
785 |
$ |
2,364 |
$ |
2,092 |
$ |
272 |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for contractual lease obligations |
|
34 |
|
- |
|
34 |
|
34 |
|
- |
|
34 |
Foreign exchange (gain) loss |
|
85 |
|
61 |
|
24 |
|
28 |
|
(317) |
|
345 |
Net interest relating to employee benefits |
|
(5) |
|
(6) |
|
1 |
|
(16) |
|
(18) |
|
2 |
Gain on financial instruments recorded at fair value |
|
(26) |
|
(101) |
|
75 |
|
(66) |
|
(24) |
|
(42) |
Loss on debt settlement |
|
- |
|
7 |
|
(7) |
|
46 |
|
9 |
|
37 |
Income tax, including for the above reconciling items (1) |
|
(1,154) |
|
70 |
|
(1,224) |
|
(1,148) |
|
15 |
|
(1,163) |
Adjusted net income |
$ |
969 |
$ |
1,281 |
$ |
(312) |
$ |
1,242 |
$ |
1,757 |
$ |
(515) |
Weighted average number of outstanding shares used in computing diluted income per share (in millions) |
|
376 |
|
376 |
|
- |
|
376 |
|
376 |
|
- |
Adjusted earnings per share – diluted |
$ |
2.57 |
$ |
3.41 |
$ |
(0.84) |
$ |
3.30 |
$ |
4.67 |
$ |
(1.37) |
|
|
|
|
(1) |
In the third quarter of 2024, previously
unrecognized deferred income tax asset was recognized which included a deferred income
tax recovery of |
The table below reflects the share amounts used in the computation of basic and diluted earnings per share on an adjusted earnings per share basis:
(In millions) |
Third Quarter |
First Nine Months |
||
2024 |
2023 |
2024 |
2023 |
|
Weighted average number of shares outstanding – basic |
358 |
358 |
358 |
358 |
Effect of dilution |
18 |
18 |
18 |
18 |
Weighted average number of shares outstanding – diluted |
376 |
376 |
376 |
376 |
Free Cash Flow
The table below reconciles free cash flow to net cash flows from (used in) operating activities for the periods indicated.
|
Third Quarter |
First Nine Months |
||||||||||
(Canadian dollars in millions) |
2024 |
2023 |
$ Change |
2024 |
2023 |
$ Change |
||||||
Net cash flows from operating activities |
$ |
737 |
$ |
408 |
$ |
329 |
$ |
3,253 |
$ |
3,335 |
$ |
(82) |
Additions to property, equipment, and intangible assets |
|
(455) |
|
(273) |
|
(182) |
|
(1,464) |
|
(1,248) |
|
(216) |
Free cash flow |
$ |
282 |
$ |
135 |
$ |
147 |
$ |
1,789 |
$ |
2,087 |
$ |
(298) |
Net Debt
Net debt is a capital management measure and a key component of the capital managed by
Net Debt to Trailing 12-Month Adjusted EBITDA (Leverage Ratio)
Net debt to trailing 12-month adjusted EBITDA ratio (also referred to as "leverage ratio") is commonly used in the airline industry and is used by
The table below reconciles leverage ratio to
(Canadian dollars in millions) |
|
|
Change |
|||
Total long-term debt and lease liabilities |
$ |
10,716 |
$ |
12,996 |
$ |
(2,280) |
Current portion of long-term debt and lease liabilities |
|
1,652 |
|
866 |
|
786 |
Total long-term debt and lease liabilities (including current portion) |
|
12,368 |
|
13,862 |
|
(1,494) |
Less cash, cash equivalents and short- and long-term investments |
|
(8,942) |
|
(9,295) |
|
353 |
Net debt (1) |
$ |
3,426 |
$ |
4,567 |
$ |
(1,141) |
Adjusted EBITDA (trailing 12 months) |
$ |
3,411 |
|
3,982 |
|
(571) |
Net debt to adjusted EBITDA ratio |
|
1.0 |
|
1.1 |
|
(0.1) |
For further information on
Third Quarter 2024 Conference Call
Media and the public may access this call on a listen-in basis. Details are as follows:
Webcast: |
|
|
|
By telephone: |
+1-647-932-3411 or 1-800-715-9871 (toll-free) |
|
|
|
Conference ID 5191072 |
|
|
|
Please allow 10 minutes to be connected to the conference call. |
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release includes forward-looking statements within the meaning of applicable securities laws. Forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may involve, but are not limited to, comments relating to guidance, strategies, expectations, planned operations or future actions. Forward-looking statements are identified using terms and phrases such as "preliminary", "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions.
Forward-looking statements, by their nature, are based on assumptions including those described herein and are subject to important risks and uncertainties. Forward-looking statements cannot be relied upon due to, among other things, changing external events and general uncertainties of the business of
Factors that may cause results to differ materially from results indicated in forward-looking statements include economic conditions as well as geopolitical conditions such as the military conflicts in the
The forward-looking statements contained or incorporated by reference in this news release represent
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Selected Financial Metrics and Statistics
The financial and operating highlights for
(Canadian dollars in millions, except per share data or where indicated) |
Third Quarter |
First Nine Months |
||||
Financial Performance Metrics |
2024 |
2023 |
Change |
2024 |
2023 |
Change |
Operating revenues |
6,106 |
6,344 |
(238) |
16,851 |
16,658 |
193 |
Operating income |
1,040 |
1,415 |
(375) |
1,517 |
2,200 |
(683) |
Operating margin (1) (%) |
17.0 |
22.3 |
(5.3) pp (8) |
9.0 |
13.2 |
(4.2) pp |
Adjusted EBITDA (2) |
1,523 |
1,830 |
(307) |
2,890 |
3,461 |
(571) |
Adjusted EBITDA margin (2) (%) |
24.9 |
28.8 |
(3.9) pp |
17.2 |
20.8 |
(3.6) pp |
Income before income taxes |
897 |
1,317 |
(420) |
1,236 |
2,090 |
(854) |
Net income |
2,035 |
1,250 |
785 |
2,364 |
2,092 |
272 |
Adjusted pre-tax income (2) |
985 |
1,278 |
(293) |
1,262 |
1,740 |
(478) |
Adjusted net income (2) |
969 |
1,281 |
(312) |
1,242 |
1,757 |
(515) |
Total liquidity (3) |
10,261 |
9,949 |
312 |
10,261 |
9,949 |
312 |
Net cash flows from operating activities |
737 |
408 |
329 |
3,253 |
3,335 |
(82) |
Free cash flow (2) |
282 |
135 |
147 |
1,789 |
2,087 |
(298) |
Net debt (2) |
3,426 |
5,438 |
(2,012) |
3,426 |
5,438 |
(2,012) |
Diluted earnings per share |
5.38 |
3.08 |
2.30 |
6.25 |
5.55 |
0.70 |
Adjusted earnings per share – diluted (2) |
2.57 |
3.41 |
(0.84) |
3.30 |
4.67 |
(1.37) |
Operating Statistics (4) |
2024 |
2023 |
Change |
2024 |
2023 |
Change |
Revenue passenger miles (RPMs) (millions) |
25,101 |
25,202 |
(0.4) |
68,070 |
65,397 |
4.1 |
Available seat miles (ASMs) (millions) |
28,892 |
28,060 |
3.0 |
79,432 |
74,573 |
6.5 |
Passenger load factor % |
86.9 % |
89.8 % |
(2.9) pp |
85.7 % |
87.7 % |
(2.0) pp |
Passenger revenue per RPM (Yield) (cents) |
22.3 |
23.3 |
(4.0) |
22.1 |
22.7 |
(3.0) |
Passenger revenue per ASM (PRASM) (cents) |
19.4 |
20.9 |
(7.2) |
18.9 |
19.9 |
(5.0) |
Operating revenue per ASM (TRASM) (cents) |
21.1 |
22.6 |
(6.5) |
21.2 |
22.3 |
(5.0) |
Operating expense per ASM (CASM) (cents) |
17.5 |
17.6 |
(0.2) |
19.3 |
19.4 |
(0.4) |
Adjusted CASM (cents) (2) |
12.2 |
12.2 |
(0.4) |
13.4 |
13.2 |
1.2 |
Average number of full-time-equivalent (FTE) employees (thousands) (5) |
37.2 |
35.9 |
3.7 |
37.1 |
35.4 |
4.7 |
Aircraft in operating fleet at period-end |
353 |
354 |
(0.3) |
353 |
354 |
(0.3) |
Seats dispatched (thousands) |
15,258 |
14,707 |
3.7 |
42,950 |
40,390 |
6.3 |
Aircraft frequencies (thousands) |
104.5 |
101.0 |
3.5 |
293.4 |
279.7 |
4.9 |
Average stage length (miles) (6) |
1,894 |
1,908 |
(0.7) |
1,849 |
1,846 |
0.2 |
Fuel cost per litre (cents) |
98.2 |
101.9 |
(3.7) |
102.5 |
109.6 |
(6.5) |
Fuel litres (thousands) |
1,399,170 |
1,342,967 |
4.2 |
3,857,355 |
3,572,766 |
8.0 |
Revenue passengers carried (thousands) (7) |
12,618 |
12,635 |
(0.1) |
34,957 |
33,891 |
3.1 |
|
|
(1) |
Operating margin is a supplementary financial measure and is defined as operating income (loss) as a percentage of operating revenues. |
(2) |
Adjusted pre-tax income (loss), adjusted net income (loss), adjusted earnings (loss) per share, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), adjusted EBITDA margin, free cash flow, net debt 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 release for descriptions of |
(3) |
Total liquidity refers to the sum of cash, cash equivalents, short- and long-term investments, and the amounts available under |
(4) |
Except for the reference to average number of FTE employees, operating statistics in this table include third-party carriers operating under capacity purchase agreements with |
(5) |
Reflects FTE employees at |
(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. |
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