Despite Soaring Fuel Costs, AC Beats Expectations In Q2
Bruce Parkinson, Open Jaw
Struggling to overcome a fuel price increase of over 30%, Air Canada managed to post a higher-than-expected quarterly profit, thanks to strong demand and higher fares.
The airline reported operating income of $226 million compared to $292 million in the second quarter of 2017. Adjusted pre-tax income of $163 million compared to adjusted pre-tax income of $229 million in the prior year's quarter.
"I am pleased to report another solid quarter of revenue growth, cost containment and unrestricted liquidity, in the face of significantly higher fuel prices," said President and CEO Calin Rovinescu. "Our record revenues this quarter demonstrate the appeal of Air Canada's brand and underscore the continuing strong demand for air travel in all of our main markets."
Passenger revenue climbed 10.4% to a record $3.921 billion.
"We did, however, revise our 2018 guidance for certain key financial metrics given the rapid increase in fuel prices in the first half of 2018," Rovinescu said. "Nevertheless, we believe that the impact is short-term, that our robust business will enable us to stay on track. We estimate that we will be able to mitigate approximately 75% of the expected 2018 annual fuel price increase through fare increases, other commercial initiatives and our cost transformation program."
In the business cabin, system passenger revenues increased $98 million or 13.7% from the second quarter of 2017 on traffic and yield growth of 10.3% and 3.1%, respectively.
In the second quarter of 2018, operating expenses of $4.107 billion increased $489 million or 14% from the same quarter in 2017, mainly driven by higher fuel prices year-over-year and by the increase in capacity.
Bruce Parkinson Editor-in-Chief
An observer and analyst of the Canadian and international travel industries for over 25 years, Bruce uses the pre-dawn hours to prepare a daily news and information package to keep industry members up to date.