Air Canada Earnings: Return of International Travel Demand Drives Record First-Quarter Revenue

Air Canada AC posted solid first-quarter results as international travel demand continues to rebound from pandemic lows. The company delivered record first-quarter revenue of CAD 4.9 billion, a 10% increase over 2019 levels despite operating at 84% of prepandemic capacity. Nonetheless, Air Canada posted an adjusted loss per share of CAD 0.53 as the company continues to grapple with persistent cost pressures that have plagued the broader airline industry. While we do not expect a material abatement of cost inflation in the near term, we are encouraged by the rebound in air travel demand and see a path to full-year profitability—something that hasn’t occurred since 2019. As such, we are maintaining our CAD 27 fair value estimate as our outlook remains intact.

Passenger revenue of CAD 4.1 billion more than doubled over the prior year, propelled by a 96% increase in revenue passenger miles. Growth was evident across all regions, though strength in the transatlantic, Pacific, and sun markets were particularly apparent. Management noted that advanced booking activity remains robust and expects full-year 2023 available seat miles to increase over 20%, ending 10% shy of prepandemic levels. Similar to industry peers, Air Canada expects to add capacity over the next several years to satisfy the strengthening demand environment. We continue to forecast a strong recovery in air travel demand and expect capacity to exceed 2019 levels by 2024.

Air Canada’s top line also benefited from favorable pricing gains of nearly 9% over the prior year, though elevated cost inflation continued to weigh on profitability. Cost per available seat mile increased 2.5% as significant increases in fuel, ground package, and passenger service costs more than offset efficiencies from fixed cost leverage. Management eluded to the airline industry’s elevated cost environment as being a structural rather than transitory dynamic.