MONTREAL — Air Canada topped expectations as it bled less cash in its latest quarter, a sign the airline's underlying recovery remains on course despite the blow to holiday travel caused by the Omicron variant.
However, a loss of nearly $500 million prompted the carrier's CEO to call for lighter travel restrictions, three days after the federal government announced it would lower key barriers to cross-border traffic.
"More needs to be done," said chief executive Michael Rousseau, demanding an end to all pre-departure COVID-19 testing rules.
"If bars and large public events can reopen at full capacity, and some provinces such as Quebec and Ontario can put an end to the vaccination passport, there is no reason to single out travel."
On Tuesday, the federal health minister said Canada would lift its blanket travel advisory and the requirement for pre-departure COVID-19 molecular testing as of Feb. 28 — though potentially cheaper and easier-to-access rapid antigen tests will be mandatory. Unvaccinated children under 12 also no longer need to self-isolate upon return to the country.
The advisory against travel abroad took effect in mid-December in response to the Omicron strain, which reversed airlines' upward trajectory across the globe.
“We were seeing strong growth before Omicron hit. Then it was almost a very quiet period for a month, month and a half, with a lot of cancellations," Michael Rousseau told analysts Friday.
"But over the last month or so, we have started seeing strong growth, strong momentum in bookings."
The country's largest airline cancelled 36 per cent of its January flights, based on the number scheduled in mid-October. By Jan. 28 it had nixed nearly half of its February flights, according to flight data firm Cirium. As of late last month, more than 43,300 trips had been scrapped in the first two months of 2022.
Corporate travel — a key market that yields high profit margins for carriers — also continues to lag as many companies hold off on return-to-work policies, though hints of growth are emerging.
“We do see — very slow — but we do see progress week over week," said chief commercial officer Lucie Guillemette."We’re just anxious to see the trend take a bit of a sharper turn here.”
Fourth-quarter adjusted earnings were "modest" but positive for the first time in seven quarters, Rousseau noted. The company reduced its net loss by 60 per cent year over year. And passenger revenues climbed by $1.6 billion to more than four times the year-earlier period as flight volume soared in October and November relative to 2020.
Cargo revenues also helped offset Air Canada's losses, jumping 163 per cent to $490 million compared with the same period a year earlier.
As e-commerce sales and demand for delivery services continued to surge, the airlinein December launched its first Boeing 767 dedicated freighter, with three more expected to hit the skies this year.
Rousseau said robust advance ticket sales, which grew almost $400 million in the quarter, give the company confidence that passengers will return and that Omicron has deferred, not cancelled, travel.
Jet fuel marked one threat to profit margins. The expense rose more than threefold compared to the end of 2020 due to more trips as well as a 67 per cent increase in the price of jet fuel, said chief financial officer Amos Kazzaz.
Despite pricier hydrocarbons and expected interest rate hikes, the rollback of travel restrictions in Canada and across the globe bodes well for Air Canada.
"The overall Canadian airline and travel sector will truly turn the corner this year, bolstered by rapidly strengthening demand for air travel," Robert Kokonis, president of consulting firm AirTrav Inc., said in an email.
On Friday Air Canada reported a fourth-quarter net loss of $493 million or $1.38 per diluted share, compared with a net loss of $1.16 billion or $3.91 per diluted share a year before.
The Montreal-based company's operating revenues for the quarter ended Dec. 31 were $2.73 billion, more than triple the $827 million recorded in the same period of 2020.
Analysts polled by financial data firm Refinitiv expected Air Canada to record revenue of $2.43 billion and a $539 million loss.
This report by The Canadian Press was first published Feb. 18, 2022.
Companies in this story: (TSX:AC)
Christopher Reynolds, The Canadian Press
