Rising fuel costs hit Air Canada’s Q2 but strong revenues underscore high demand, says Rovinescu

Rising fuel costs hit Air Canada’s Q2 but strong revenues underscore high demand

MONTREAL — Air Canada saw a 31% increase in the price of jet fuel compared with last year’s second quarter and will offset some of the impact with higher fares and other initiatives, says CEO Calin Rovinescu.

The Montreal-based airline did well in terms of revenue, which was up 10.4% compared with last year’s second quarter. Adjusted earnings dropped to $114 million or 41 cents per share.

That was about half as much as Air Canada’s adjusted earnings of $226 million or 82 cents per share in the second quarter of 2017, but still better than analyst estimates of 28 cents per share.

Air Canada’s revenue for the three months ended June 30 was in line with estimates at $4.33 billion, up from $3.91 billion in Q2 2017.

“I am pleased to report another solid quarter of revenue growth, cost containment and unrestricted liquidity, in the face of significantly higher fuel prices. 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,” said Rovinescu.

He added that Air has revised its 2018 guidance for certain key financial metrics given the rapid increase in fuel prices in the first half of 2018.

Air Canada is now estimating jet fuel will cost 80 cents per litre in the third quarter and 78 cents per litre for the full year. The previous full-year estimate was 75 cents per litre.

“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,” he said.

Air Canada also reported a $77-million net loss, or 28 cents per share, which included a $186-million loss on the expected sale of 25 Embraer planes and a $25-million loss on foreign exchange.

In the same period last year, it had a $26-million gain on a sale of assets and a $68-million gain on foreign exchange.

Rovinescu says Air Canada’s ongoing strategy was front and centre throughout Q2. “We launched 25 new routes this summer, introduced Air Canada Signature Service for North American premium customers, began offering satellite WiFi on our wide-body international fleet, and we were recognized as one of the top five brands to work for in Canada,” he said. “We also completed a complex joint venture agreement begun four years ago with Air China, making Air Canada the first North American carrier to negotiate a joint venture with a Chinese airline. This gives us unrivalled access from North America to the fastest growing and soon-to-be largest aviation market in the world.”

Earlier this month Air Canada was among the winners at the Skytrax World Airline Awards. Air Canada was named ‘Best Airline in North America’, winning the award for the second consecutive year and for seven out of the past nine years.

“The Skytrax Award shows that our customers appreciate our progress and are rewarding us with their loyalty, with our aircraft flying 83.1% full on average during the quarter.”

With files from The Canadian Press