Air Canada’s Q2 Profit Jumps 33% As Fuel Costs Drop

Open Jaw

Air Canada posted Q2 adjusted net income of $250 million, an improvement of $111 million or approximately 80% over the same period last year, as the airline absorbed significant new capacity and the negative effects of a weaker CAD were offset by lower-priced fuel and other factors.

The carrier’s revenue for the 3 mo. ended 30JUN was $3.414 billion, up $109 million from Q2 2014. Operating expenses rose only $31 million, even though the loonie's decline compared with the USDS increased AC’s costs for fuel and other items by $134 million.

"I am very pleased to report that Air Canada achieved record EBITDAR results for a 5th consecutive quarter in addition to record operating income and adjusted net income results and significant year-over-year improvements to operating margin and EBITDAR margin," said Calin Rovinescu, President & CEO. "With our growth this quarter, we have successfully increased passenger revenue by 3.9%, expanded margins, significantly increased our adjusted net income and EBITDAR and continued to improve our return on invested capital.

“We have delivered on planned cost transformation initiatives and eliminated our significant pension solvency deficit. We have strengthened our balance sheet with increased liquidity levels, improved net cash flows, reduced adjusted net debt, and expect further benefits from our recent credit rating upgrade,” added Rovinescu.

Looking ahead, the CEO said AC expects to deliver more record results in the 3rd quarter, with EBITDAR margin expansion vs. prior year higher than the 350 basis point expansion recorded in the 2nd quarter. “Demand continues to be robust moving into, historically, our most important quarter given the travel demands and patterns of our North American customers. Our capacity additions for the year, which are largely in our international markets, are important contributors to our increased profits and remain consistent with our plan established in a higher fuel price environment.

Rovinescus says the “transformative changes” made over the past few years” give the airline the cost structure, fleet and flexibility to respond to increased competition in key markets and also to weaknesses in the CAD or a downturn in the economy.

“If we see demand weakening, we can adjust quickly. We are building a resilient airline for the long-term, a sustainably profitable company and global industry leader," said Rovinescu.

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