Air Canada earnings: Airline 'in recovery mode' as revenue nearly triples, demand returns

Air Canada's CEO says the airline "is now in recovery mode" as the company narrowed its loss to $640 million, revenue nearly tripled and travel demand began to recover in the third quarter of the year.

The Montreal-based airline (AC.TO) reported a net loss of $640 million, or $1.79 per diluted share, in the three month period ending Sept. 30, marking an improvement from a net loss of $685 million, or $2.31 per diluted share, during the same period last year. The narrowed loss came as revenue jumped to $2.103 billion, almost three times the $757 million earned in 2020.

The company's stock jumped as much as 5 per cent in early trading following the release of earnings on Tuesday. Shares of Air Canada were trading at $23.92 on the TSX as at 12:43 p.m. ET, an increase of nearly four per cent compared to Monday's closing price.

"Although the pandemic continues to impact our industry, the results from the quarter clearly demonstrate that our airline is making great progress and is now in recovery mode," chief executive Michael Rousseau said on a conference call with analysts on Tuesday.

"We are very encouraged by the favourable revenue and traffic trends in the third quarter. There were strong increases in key passenger geographic segments, a record cargo performance (with a) billion in revenue on a year-to-date basis, and significant improvements in both Air Canada Vacations and Aeroplan."

The airline increased its capacity, as measured by available seat miles, by 87 per cent in the third quarter of 2021 when compared to the same period last year and up 178 per cent from the previous quarter. However, capacity still remains below pre-pandemic levels, down 66 per cent compared to 2019.

Still, Air Canada is seeing travel demand rise and is ramping up its schedule as a result. The airline says it significantly increased its capacity to the United States, with 220 flights between the U.S. and Canada operating daily, and will increase service to key South American destinations as well as to Europe, Africa, the Middle East and India. The company says it plans on expanding its summer service in 2022 to nearly 30 transatlantic destinations as leisure travel demand improves.

"We've seen, certainly in the last two months or so, very solid ramp-up particularly in the domestic, transatlantic and sun markets. In fact, in some of those areas, we're actually seeing booking levels that are equal to what we observed in 2019," Lucie Guillemette, Air Canada's chief commercial officer, said on the conference call.

"We're very confident the capacity that we have in place for Q4 ...and also Q1 is shaping up very nicely... As we look at summer 2022, we're also very encouraged by what we're seeing in terms of how the transatlantic markets are building."

The improved travel environment also means Air Canada will no longer provide guidance when it comes to net cash burn, something it had done throughout the COVID-19 pandemic. RBC Capital Markets analyst Walter Spracklin says the decision shows "that the company feels its liquidity position and current trends are adequate and it no longer needs to provide the quarterly cash burn guidance."

"There's no doubt we're very encouraged by what we see," Rousseau said.

"And there's no doubt that the length of the recovery has moved in from the consensus of 2025 to at least 2024 and maybe 2023."

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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