Air Canada (AC) Q2 2024 earnings summary

Executive summary

• Q2 2024 operating revenues reached CAD 5.5 billion, up 2% year-over-year, with adjusted EBITDA of CAD 914 million and a margin of 16.6%.

• Operating income was CAD 466 million, down CAD 336 million year-over-year; net income was CAD 410 million (CAD 1.04 diluted EPS), compared to CAD 838 million (CAD 2.34 diluted EPS) in Q2 2023.

• Free cash flow year-to-date was CAD 1.5 billion, with Q2 free cash flow at CAD 451 million; 11.6 million passengers carried and on-time performance improved by 10 points.

• International markets, especially the Pacific, drove earnings, while Atlantic performance was impacted by excess capacity and weak European demand.

• Strategic capacity shifts from Atlantic to Pacific and India were implemented to optimize profitability.

Financial highlights

• Operating expenses rose 9% year-over-year to CAD 5.053 billion, mainly due to higher capacity, fuel, labor, and maintenance costs.

• Adjusted net income was CAD 369 million (CAD 0.98 per diluted share), down from CAD 664 million (CAD 1.85 per diluted share) last year.

• Adjusted CASM increased 1.7% year-over-year to 13.53 cents; fuel expense rose 12% due to higher consumption and prices.

• Net debt decreased to CAD 3.6 billion from CAD 5.3 billion year-over-year; leverage ratio improved to 1.0.

• Total liquidity stood at CAD 10.2 billion as of June 30, 2024.

Outlook and guidance

• Full-year 2024 capacity expected to grow 5.5%-6.5%; adjusted EBITDA guidance set at CAD 3.1-3.4 billion.

• PRASM projected to decline ~4% year-over-year; adjusted CASM to rise 2.5%-3.5%.

• Q3 2024 ASM capacity expected to increase 4–4.5% year-over-year.

• Q3 2024 PRASM expected above 2019 and 2022 levels, with RASM stabilizing in Q4.

• Assumptions include moderate Canadian GDP growth, average CAD/USD exchange rate of 1.36, and jet fuel at CAD 1.03/litre.