- Operating margin of 12.1 per cent, first positive quarterly operating margin since the pandemic began
- Operating revenues of $5.322 billion, more than double the third quarter of 2021
- Net loss of
$508 million compared to a net loss of$640 million in the third quarter of 2021 - EBITDA margin* of 19.9 per cent for the third quarter of 2022
- Total liquidity of over $10.2 billion at
September 30 , 2022
"
"We generated
"Despite the global disruption of air travel, through teamwork and focused efforts, we safely transported nearly 11.5 million customers to their destinations this quarter. We are further encouraged by continuing strong demand, now further stimulated by the easing of COVID-related restrictions. Advance ticket sales in the quarter were at 95 per cent of third quarter 2019 levels. In the third quarter, our adjusted unit cost or adjusted CASM* improved by 38 per cent to
"Thanks to the hard work and commitment of our employees, after a difficult June and July, we saw significant operational improvement throughout August and September, with the operation today now on par with pre pandemic levels. Still, we know many customers experienced disruptions travelling this summer, and we sincerely regret any inconveniences that have occurred. We would like to thank our customers for their understanding and loyalty and assure them that the lessons of this operationally challenging period are now being applied to build greater resiliency going forward, and to elevate the customer experience overall.
Third Quarter 2022 Financial Results
- Operating capacity, measured by Available Seat Miles (ASMs) more than doubled from the third quarter of 2021. Capacity in the third quarter was 79 per cent of the third quarter of 2019, in line with projections in
Air Canada's second quarter 2022 earnings release, datedAugust 2, 2022 . - Passenger revenues of
$4.818 billion increased about three times from the third quarter of 2021, representing about 94 per cent of passenger revenues in the third quarter of 2019. - Operating revenues of
$5.322 billion increased about two-and-a-half times from the third quarter of 2021. - Operating expenses of
$4.678 billion increased$2.211 billion from the third quarter of 2021. - Cost per available seat mile (CASM) decreased to
18.3 cents from the third quarter 2021 CASM of 22.2 cents, a sequential decrease from CASM of20.8 cents in the second quarter of 2022. - Adjusted cost per available seat mile (Adjusted CASM)* of 11.6 cents compared to third quarter 2021 adjusted CASM of 18.7 cents, a sequential decrease from Adjusted CASM of
13.1 cents in the second quarter of 2022. Compared to the third quarter of 2019, Adjusted CASM increased 14.8 per cent. - Operating income of
$644 million compared to an operating loss of$364 million in the third quarter of 2021, the first quarterly operating income since the pandemic began. - EBITDA* (excluding special items) or earnings before interest, taxes, depreciation, and amortization of
$1.057 billion , better than the negative EBITDA of$67 million in the third quarter of 2021. - Net loss of
$508 million (or$1.42 per diluted share), compared to a net loss of$640 million (or$1.79 per diluted share) in the third quarter of 2021. Third quarter 2022 net loss included a foreign exchange loss of$951 million . - Net cash flows from operations of
$290 million compared to net cash flows from operations of$305 million in the third quarter of 2021.
* EBITDA (excluding special items), EBITDA margin, adjusted pre-tax income (loss), free cash flow, net debt, and adjusted CASM (discussed in this news release) are non-GAAP financial measures, non-GAAP ratios, or supplemental financial measures. Such measures are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results. Refer to the "Non-GAAP Financial Measures" section of this news release for descriptions of
Outlook
For the fourth quarter of 2022,
Air Canada expects to have increased its full year 2022 ASM capacity by about 148 per cent from 2021 ASM levels (or about 73 per cent of 2019 ASM levels).Air Canada will continue to adjust capacity and take other measures as required, including to account for passenger demand.- For 2022,
Air Canada expects Adjusted CASM to be about 16 to 18 per cent above 2019 levels. The variance to prior guidance is mainly due to an increase in wages, salaries and benefits, costs related to a higher number of passengers carried versus prior expectations (which translates into higher passenger service and distribution costs per ASM), as well as the impact of the weakening of the Canadian dollar. - For 2022,
Air Canada maintains its expectation of an annual EBITDA margin* of about 8 to 11 per cent.
Major Assumptions
Full year assumptions were made by
Non-GAAP Financial Measures
Below is a description of certain non-GAAP financial measures used by
EBITDA
EBITDA (earnings before interest, taxes, depreciation and amortization) is commonly used in the airline industry and is used by
EBITDA Margin
EBITDA margin (EBITDA as a percentage of operating revenue) is commonly used in the airline industry and is used by
Operating Margin
Operating margin (operating income (loss) as a percentage of operating revenues) is commonly used in the airline industry and is used by
EBITDA, EBITDA margin, and operating margin are reconciled to GAAP operating income (or loss) as follows:
Third Quarter | ||||||
(Canadian dollars in millions, except where indicated) | 2022 | 2021 | Change | |||
Operating income (loss) – GAAP | $ | 644 | $ | (364) | $ | 1,008 |
Add back: | ||||||
Depreciation and amortization | 413 | 400 | 13 | |||
EBITDA (including special items) | $ | 1,057 | $ | 36 | $ | 1,021 |
Remove: | ||||||
Special items | - | (103) | 103 | |||
EBITDA (excluding special items) | $ | 1,057 | $ | (67) | $ | 1,124 |
Operating revenues | $ | 5,322 | $ | 2,103 | $ | 3,219 |
Operating margin (%) | 12.1 | (17.3) | 29.4 pp | |||
EBITDA margin (%) | 19.9 | (3.2) | 23.1 pp |
Adjusted Cost per Available Seat Mile (CASM)
In calculating adjusted CASM, aircraft fuel expense is excluded from operating expense results as it fluctuates widely depending on many factors, including international market conditions, geopolitical events, jet fuel refining costs and
Prior to 2021,
Excluding aircraft fuel expense, the cost of ground packages at
Adjusted CASM is reconciled to GAAP operating expense as follows:
(Canadian dollars in millions, except where indicated) | Third Quarter | |||||
2022 | 2021 | Change | ||||
Operating expense – GAAP | $ | 4,678 | $ | 2,467 | $ | 2,211 |
Adjusted for: | ||||||
Aircraft fuel | (1,617) | (472) | (1,145) | |||
Ground package costs | (80) | (23) | (57) | |||
Special items | - | 103 | (103) | |||
Freighter costs (excluding fuel) | (26) | - | (26) | |||
Operating expense, adjusted for the above-noted items | $ | 2,955 | $ | 2,075 | $ | 880 |
ASMs (millions) | 25,562 | 11,116 | 130.0 % | |||
Adjusted CASM (cents) | ¢ | 11.56 | ¢ | 18.65 | ¢ | (7.09) |
Adjusted Pre-tax Income (Loss)
Adjusted pre-tax income (or loss) is used by
Adjusted pre-tax income (or loss) is reconciled to GAAP income (or loss) before income taxes as follows:
(Canadian dollars in millions) | Third Quarter | |||||
2022 | 2021 | $ Change | ||||
Loss before income taxes – GAAP | $ | (504) | $ | (679) | $ | 175 |
Adjusted for: | ||||||
Special items | - | (103) | 103 | |||
Foreign exchange loss | 951 | 136 | 815 | |||
Net interest relating to employee benefits | (9) | 1 | (10) | |||
(Gain) loss on financial instruments recorded at fair value | 25 | (114) | 139 | |||
(Gain) loss on debt settlements and modifications | (17) | 110 | (127) | |||
Adjusted pre-tax income (loss) | $ | 446 | $ | (649) | $ | 1,095 |
Free Cash Flow
The table below provides the calculation of free cash flow for
Third Quarter | ||||||
(Canadian dollars in millions) | 2022 | 2021 | $ Change | |||
Net cash flows from operating activities | $ | 290 | $ | 305 | $ | (15) |
Additions to property, equipment, and intangible assets, net of | (333) | (149) | (184) | |||
Free cash flow | $ | (43) | $ | 156 | $ | (199) |
Additional Financial Measures
Net Debt
Net debt is a capital management measure and a key component of the capital managed by
The table below reflects
(Canadian dollars in millions) |
|
| $ Change | |||
Total long-term debt and lease liabilities | $ | 15,799 | $ | 15,511 | $ | 288 |
Current portion of long-term debt and lease liabilities | 1,236 | 1,012 | 224 | |||
Total long-term debt and lease liabilities (including current portion) | 17,035 | 16,523 | 512 | |||
Less cash, cash equivalents and short and long-term investments | (9,206) | (9,570) | 364 | |||
Net debt | $ | 7,829 | $ | 6,953 | $ | 876 |
For further information on
Third Quarter 2022 Conference Call
Media and the public may access this call on a listen-in basis. Details are as follows:
Live audio webcast: https://edge.media-server.com/mmc/p/a5ecs3mw
By telephone: 416-340-2217 or 1-800-898-3989 (toll-free), passcode 5899502#
Please allow 10 minutes to be connected to the conference call.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release includes forward-looking statements within the meaning of applicable securities laws. Forward-looking statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements may involve, but are not limited to, comments relating to guidance, strategies, expectations, planned operations or future actions. Forward-looking statements are identified using terms and phrases such as "preliminary", "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will", "would", and similar terms and phrases, including references to assumptions.
Forward-looking statements, by their nature, are based on assumptions including those described in this news release and the documents incorporated by reference herein and are subject to important risks and uncertainties. Forward-looking statements cannot be relied upon due to, among other things, changing external events and general uncertainties of the business of
During the period from
Other factors that may cause results to differ materially from results indicated in forward-looking statements include the ongoing effects from the COVID-19 pandemic, economic and geopolitical conditions such as the military conflict between
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Selected Financial Metrics and Statistics
The financial and operating highlights for
(Canadian dollars in millions, except per share data or where indicated) | Third Quarter | ||
Financial Performance Metrics | 2022 | 2021 | $ Change |
Operating revenues | 5,322 | 2,103 | 3,219 |
Operating income (loss) | 644 | (364) | 1,008 |
Loss before income taxes | (504) | (679) | 175 |
Net loss | (508) | (640) | 132 |
Adjusted pre-tax income (loss) (1) | 446 | (649) | 1,095 |
Operating margin (%) | 12.1 | (17.3) | 29.4 pp (8) |
EBITDA (excluding special items) (1) | 1,057 | (67) | 1,124 |
EBITDA margin (1) (%) | 19.9 | (3.2) | 23.1 pp |
Total liquidity (2) | 10,236 | 14,504 | (4,268) |
Net cash flows from operating activities | 290 | 305 | (15) |
Free cash flow (1) | (43) | 156 | (199) |
Net debt (1) | 7,829 | 7,117 | 712 |
Diluted loss per share | (1.42) | (1.79) | 0.37 |
Operating Statistics (3) | 2022 | 2021 | % Change |
Revenue passenger miles ("RPMs") (millions) | 22,118 | 7,915 | 179.5 |
Available seat miles ("ASMs") (millions) | 25,562 | 11,116 | 130.0 |
Passenger load factor % | 86.5 % | 71.2 % | 15.3 pp |
Passenger revenue per RPM ("Yield") (cents) | 21.8 | 20.7 | 5.4 |
Passenger revenue per ASM ("PRASM") (cents) | 18.8 | 14.7 | 28.1 |
Operating revenue per ASM (cents) | 20.8 | 18.9 | 10.0 |
Operating expense per ASM ("CASM") (cents) | 18.3 | 22.2 | (17.5) |
Adjusted CASM (cents) (1) | 11.6 | 18.7 | (38.1) |
Average number of full-time-equivalent ("FTE") employees (thousands) (4) | 31.8 | 21.3 | 49.7 |
Aircraft in operating fleet at period-end (5) | 344 | 337 | 2.1 |
Seats dispatched (thousands) | 13,951 | 7,094 | 96.7 |
Aircraft frequencies (thousands) | 99.6 | 57.4 | 73.6 |
Average stage length (miles) (6) | 1,832 | 1,565 | 17.1 |
Fuel cost per litre (cents) | 131.8 | 72.9 | 80.7 |
Fuel litres (thousands) | 1,227,669 | 648,515 | 89.3 |
Revenue passengers carried (thousands) (7) | 11,466 | 5,067 | 126.3 |
(1) | Adjusted pre-tax income (loss), EBITDA (excluding special items) (earnings before interest, taxes, depreciation, and amortization), EBITDA margin, free cash flow, net debt and adjusted CASM are non-GAAP financial measures, non-GAAP ratios or supplemental financial measures. Such measures are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results. Refer to section "Non-GAAP Financial Measures" of this news release for descriptions of non-GAAP financial measures and to the tables accompanying this news release for a quantitative reconciliation of the non-GAAP financial measures, used in this news release to the most comparable GAAP measure. |
(2) | Total liquidity refers to the sum of cash, cash equivalents, short and long-term investments, and the amounts available under |
(3) | Except for the reference to average number of FTE employees, operating statistics in this table include third party carriers operating under capacity purchase agreements with |
(4) | Reflects FTE employees at |
(5) | The number of aircraft in |
(6) | Average stage length is calculated by dividing the total number of available seat miles by the total number of seats dispatched. |
(7) | Revenue passengers are counted on a flight number basis (rather than by journey/itinerary or by leg) which is consistent with the IATA definition of revenue passengers carried. |
(8) | "pp" denotes percentage points and refers to a measure of the arithmetic difference between two percentages. |
SOURCE
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