Yield Down Nearly 5% But Air Canada Posts Record Q1 EBITDAR
Despite a yield decline of 4.7% in Q1, AC has reported record EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rent) of $460 million, compared to $442 million in the same quarter in 2015. Revenue was up 2.8% and net income totalled $101 million, compared to a net loss of $309 million in Q1 2015.
CEO Calin Rovinescu summarized the quarter this way: "Despite somewhat unsettled economic times in Canadian resource markets, a very competitive domestic pricing environment and a continued weak Canadian dollar in the quarter, we were able to increase our revenue base, increase our unrestricted liquidity, increase net cash flow from operations, deliver on our ROIC target, produce a record EDITDAR level and take delivery of 4 new Boeing 787-9 aircraft while maintaining our adjusted net debt level and leverage ratio.”
Rovinescu added that the carrier saw a “marked increase” in international and U.S.-originating customers and said the performance of rouge continues to exceed their expectations. He also praised the next generation Boeing 787-9 aircraft that entered the fleet in the quarter for driving both productivity improvements and enhanced customer comfort.
In Q1, system passenger revenues of $2.864 billion increased $78 million or 2.8%. Traffic growth of 7.7% was spread throughout the airline’s 5 geographic markets.
Rovinescu attributed the nearly 5% yield decline to many factors, including increased market capacity, increased competition on regional routes and competitive pricing activities affecting certain domestic markets.
Other factors he citied are a decline in higher-yielding oil market-related traffic, a reduction in carrier surcharges relating to lower fuel prices; an increase in average stage length; a higher proportion of seats into long-haul leisure markets and a higher proportional growth of lower-yielding international connecting 6th freedom traffic.
Costs were up too. Operating expenses of $3.189 billion increased $140 million or 5% from the 1st quarter of 2015. The airline says the increase was mainly due to the impact of 8.2% growth in capacity and the unfavourable impact of a weaker CAD on foreign currency denominated non-fuel operating expenses of $106 million, partly offset by lower aircraft fuel expense of $168 million.