Air Canada Record Q3 Net Income Tops $734 Million, Up 61%

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AC has reported record 3rd quarter adjusted net income of $734 million compared to adjusted net income of $457 million in Q3 2014, an improvement of $277 million or approximately 61%. 


On a GAAP basis, AC reported record Q3 operating income of $815 million compared to operating income of $526 million, an improvement of $289 million or approximately 55% from the 3rd quarter of 2014.  An operating margin of 20.3% in the 3rd quarter of 2015 reflected an improvement of 6.5 percentage points from the same quarter in 2014. 


"I am very pleased with the financial results we realized in the 3rd quarter, reflecting both the continued, successful execution of the strategic plan that we have developed over the last several years as well as the efforts of all of our employees," said Calin Rovinescu, President & CEO. 


"We will continue to direct the majority of our operating cash flow to finance the renewal of our fleet with more fuel efficient aircraft and to reduce net debt levels, two drivers which we firmly believe will continue to increase long-term shareholder value.”


Rovinescu says the airline is positioning itself for long-term success. "The transformative changes we have made in recent years provide us with the cost structure, fleet and flexibility to respond not only to competitive market conditions, but also to fluctuations in the Canadian dollar and economic downturns. Moreover, our plan is not based on fuel prices staying at the current levels.


“Our capacity additions for the year, largely in international markets, remain consistent with our plan that had been established in a higher fuel price environment and continue to be important contributors to our increased profits.”


The AC leader says the company has also increased training and support for employees, which he says is contributing to higher employee engagement levels and improved customer service scores.


In the 3rd quarter, on capacity growth of 10.5%, system passenger revenues of $3.7 billion increased $240 million or 6.9% from Q3 of 2014.  Yields were down, however: passenger revenue per available seat mile (PRASM) decreased 4.0% from the 3rd quarter of 2014. 


AC says the yield decline is “consistent with the anticipated yield impact stemming from the implementation of the airline's strategic plan, reflected an increase in average stage length of 3.7%, which alone had the effect of reducing system yield by 2.1 percentage points, a higher proportional growth of lower-yielding international-to-international passenger flows in support of the airline's international expansion strategy, a higher proportion of seats into long-haul leisure markets and a reduction in carrier surcharges relating to lower fuel prices, particularly where carrier surcharges are regulated.”


At 30SEP, unrestricted liquidity (cash, short-term investments and undrawn lines of credit) amounted to $3.4 billion, up from $2.8 billion a year before.  


Adjusted net debt amounted to $5.4 billion, an increase of $291 million from 31DEC14 due to higher long-term debt and finance lease balances, partly offset by higher cash balances. 


For the 12 months ended 30SEP, return on invested capital was 18.0% vs. 11.4% for the 12 months ended 30SEP14. 

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