Air Canada logos are visible on the tails of planes at Montreal's airport on Monday, June 26, 2023. (The Canadian Press)
Air Canada has revised its earnings forecast for 2024, citing lower-than-expected passenger numbers this summer due to intense competition in international markets. The Montreal-based airline now anticipates adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between $3.1 billion and $3.4 billion, a drop from the previous estimate of $3.7 billion to $4.2 billion.
This new outlook was released on Monday alongside preliminary second-quarter results. Air Canada expects operating revenues of approximately $5.5 billion for the second quarter, slightly up from $5.4 billion the previous year. However, operating income is projected to fall to $466 million, down from $802 million in the second quarter of 2023.
In addition to the stiff competition, Air Canada has faced ongoing supply chain pressures, changing market conditions, and geopolitical issues. The North American airline industry as a whole is struggling with an oversupply of seats, leading to more available flights than there is demand. Airlines are also dealing with high labour and fuel costs and continued supply chain disruptions.
Many Canadian airlines, including Air Canada's competitor WestJet, have experienced delays in plane deliveries due to production issues at Boeing Co., hindering fleet expansion. Air Canada and Transat A.T. Inc. are also affected by the recall of Pratt & Whitney turbofan jet engines for inspection and repair.
Labour disputes are another challenge for Air Canada. Last month, the union representing the airline's pilots sought federal conciliation assistance after more than a year of ongoing negotiations. The collective agreement with the pilots expired on September 29, 2023.
Despite these hurdles, Air Canada maintains that demand remains strong. The airline noted that its preliminary second-quarter operating revenues would set a record for that period, with load factors remaining above historical averages. The company continues to manage costs effectively through productivity measures, cost reductions, and other financial strategies.
RBC Capital Markets analyst James McGarragle commented that the revised earnings forecast is likely to disappoint investors, although similar trends of industry-wide weakness have been observed among other airlines, including Transat and some U.S. carriers.
Air Canada's lowered forecast is a reflection of current industry challenges, including competition, supply chain issues, and labour concerns. However, the airline remains optimistic about demand and is working to control costs to navigate these turbulent times.
