Benefiting from improved traffic and lower-than-expected fuel prices

Article content

Air Canada lifted its earnings outlook for 2023 by an additional $1 billion amid improved traffic, stronger-than-anticipated demand for travel and lower-than-expected fuel prices.

Advertisements 2

Article content

On May 4, the company raised expectations for its annual adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to between $3.5 billion and $4 billion from the previous $2.5 billion and $3 billion.

Article content

The revised guidance comes ahead of the company’s first quarter earnings report on May 12.

Walter Spracklin, an analyst for Royal Bank of Canada, said demand and pricing after the summer will still be a concern for airlines, but he has commended management efforts to regain post-pandemic footing.

“(Air Canada) is capitalizing on very solid near-team demand trends that are allowing the company to raise prices in excess of rising costs, while benefiting from the drop in fuel prices,” Spracklin wrote in a note to clients May 5.

Article content

Advertisements 3

Article content

Air Canada also adjusted its forecasted operating costs to about 0.5 to 2.5 per cent below 2022 levels from 13 to 15 per cent above 2019 levels. It said the adjustment was due to various changes to expense items, including from higher-than-expected traffic.

In the previous quarter, the airline reported a significant increase in expenses, something that likely weighed on investors, driving the airline’s shares down despite reporting record passenger and operating revenues for that quarter.

At the time, chief executive Michael Rousseau said the environment was challenging due to fuel costs and inflation.

Air Canada will now use 2022 instead of 2019 as a baseline comparison for its 2023 adjusted costs guidance.

Advertisements 4

Article content

“Given the new cost environment, prior comparisons to the 2019 baseline are no longer as meaningful, and comparisons to 2022 are more appropriate,” the company said.

The airline’s capacity guidance for the year is mostly unchanged.

Air Canada said the updated forecast was prepared under the assumption of moderate gross domestic product growth in 2023.

It also assumes the Canadian dollar will trade, on average, at $1.34 per US dollar for the full year and that the price of jet fuel will average $1.09 per liter.

Air Canada shares fell 2.4 per cent to $18.34 at the close on Thursday.

• Email: [email protected] | Twitter:


Postmedia is committed to maintaining a lively but civil forum for discussion and encourages all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

Join the Conversation