Air Canada shakes off Boeing 737 Max issues with profit above expectations
Air Canada has posted a surprise profit in the first quarter of 2019, with more passengers and a new loyalty program overcoming rising costs and the impact of the global grounding of Boeing’s 737 Max aircraft.
Shares in the airline, Canada’s largest carrier, jumped more than four per cent after the company announced a 9.4 per cent rise in total operating revenue to $4.45bn Canadian dollars (£2.52bn).
Rovinescu said the year had been more demanding than expected after the global fleet of Boeing 737 Max planes were grounded following two deadly crashes in five months. The airline has 24 of the aircraft.
"First quarter is always the most demanding for Canadian airlines," Rovinescu said. "This year was an exception and it was made more so with the unexpected grounding of the 737 MAX."
He said the planes would be returned to service and had been cleared by the airline and the regulator.
Air Canada cancelled 1,600 mainline flights during the first three months of the year, a 40 per cent increase compared to the first quarter of 2018, Rovinescu told analysts.
The company was able to protect most of its flights from the date of the grounding through to 30 April by entering into new leases, among other strategies, he said.
Overall, the chief executive was bullish: “These Q1 results, following on records set in previous quarters, are an affirmation of our ability to operate on a sustainably profitable basis, notwithstanding fuel price or foreign currency fluctuations or other unexpected challenges,” Air Canada chief executive Calin Rovinescu said.
The result beat analysts’ forecasts of $4.39bn Canadian dollars.
Air Canada shares rose despite the country’s main stock index falling at the open, after US President Donald Trump threatened to raise tariffs on China.
Another key factor in the result was Air Canada’s acquisition of the Aeroplan loyalty program, which drove a nearly five per cent increase in passenger yield.
Air Canada said traffic rose 4.2 per cent while passenger revenue per available seat mile, a key revenue measure for airlines, increased 4.5 per cent in the first quarter.
The Montreal-based company reported an adjusted net income of $17m Canadian dollars (£9.6m), or six Canadian cents per share, in the first quarter ended 31, compared to a loss of $26m Canadian dollars (£14.7m), or 10 Canadian cents per share, a year earlier.