Air Canada on Tuesday, April 26 reported its 2022 first quarter financial results.

*In the first quarter of 2022, Air Canada’s operating capacity, measured by Available Seat Miles (ASMs) increased about 3.4 times from the first quarter of 2021. When compared to the first quarter of 2019, ASM capacity represented a decline of 45 per cent, which was generally in line with the capacity expectations projected in Air Canada’s fourth quarter 2021 earnings release dated February 18, 2022.
*First quarter 2022 passenger revenues of $1.917 billion increased nearly five times from the first quarter of 2021.
*First quarter 2022 operating revenues of $2.573 billion increased about three-and-a-half times from the first quarter of 2021.
*First quarter 2022 total operating expenses of $3.123 billion increased $1.345 billion or 76 per cent from the first quarter of 2021.
*First quarter 2022 cost per available seat mile (CASM) of 21.8 cents compared to first quarter 2021 CASM of 42.2 cents.
*First quarter 2022 adjusted cost per available seat mile* (adjusted CASM) of 15.6 cents compared to first quarter 2021 adjusted CASM of 40.4 cents.
*First quarter 2022 EBITDA (excluding special items)* or earnings before interest, taxes, depreciation and amortization of negative $143 million compared to negative EBITDA of $763 million in the first quarter of 2021.
*First quarter 2022 net loss of $974 million or $2.72 per diluted share compared to a net loss of $1.304 billion or $3.90 per diluted share in the first quarter of 2021.
*First quarter 2022 cash from operations was $335 million compared to cash used in operations of $888 million in the first quarter of 2021, an improvement of $1,223 million driven by improved operating results and strong advance ticket sales. Free cash flow of $59 million in the first quarter of 2022 improved by $1,221 million when compared to the same period in 2021.

“The substantial year-over-year improvement in Air Canada’s first quarter results is clear evidence that a recovery is underway. Our strong improvement is a testament to our employees, and I thank them for their hard work taking care of our customers throughout more than two years of a global pandemic. Now, our employees are demonstrating this same level of determination, commitment and passion in executing on our recovery strategy,” said Michael Rousseau, President and Chief Executive Officer of Air Canada.

“The year began with weakness brought on by the Omicron variant and travel restrictions. However, we quickly rebounded in March with passenger volumes exceeding the strong December levels and passenger ticket sales in March 2022 over 90 per cent of March 2019 levels, a leading indicator to much stronger 2022 second and third quarter results. For the quarter, Air Canada had operating revenues of $2.573 billion, more than triple that of the same quarter in the prior year. This was accompanied by a strict cost discipline that reduced adjusted CASM* by over six per cent from the fourth quarter of 2021. Quarterly EBITDA*, while a negative $143 million, improved $620 million over last year and we ended the quarter with $10.162 billion in unrestricted liquidity, close to 2021 year-end levels.”

“In anticipation of our recovery, Air Canada has kept the course with key long-term projects to increase and diversify revenue and lower costs. One such program is the expansion of Air Canada Cargo, with quarterly revenue up 42 per cent to $398 million from the first quarter of 2021, and now further expanded with the addition of two new Boeing 767-300 freighters to be delivered in 2022. The renegotiation of key engine maintenance contracts completed in the quarter, will also yield savings over the remaining life of the contracts. Aeroplan air redemption bookings in the quarter exceeded those of the same quarter in 2019 by 19 per cent. The relaunched program saw the highest new member acquisitions and redemptions in a quarter, and generated third-party gross billings exceeding first quarter 2019 levels by 21 per cent,” said Rousseau.

“Air Canada is rapidly adapting for the post-pandemic world. We are doing our part by contributing to the travel of Ukrainians to Canada, with a substantial donation of 100 million Aeroplan points. We have also advanced our ESG goals in the quarter by announcing an order for 26 fuel-efficient Airbus A321XLR aircraft, which we have now increased to 30 aircraft. As well, we have recently entered into a long-term agreement with International Aero Engines, LLC (Pratt & Whitney) for the selection of the PW1100G-JM engines, spare engines and related maintenance services for these new aircraft. We are responding to the evolving competitive landscape through our Rise Higher strategy to elevate all aspects of our business, particularly as it relates to the customer experience. Given pent-up travel demand, the demonstrated loyalty of our customers, and the expected further removal of travel-related government restrictions, Air Canada anticipates its recovery will gain momentum through the balance of 2022 and beyond,” Rousseau added.

First Quarter 2022 Overview
Over the quarter, and until February 28, 2022, all travellers, regardless of vaccination status, were required to provide a negative pre-entry COVID-19 PCR test result taken within 72 hours of departure or a proof of a positive test result received in the previous 11 to 180 days. On February 15, 2022, the Government of Canada announced changes to certain travel restrictions for fully vaccinated travellers. Refer to section 4 “Overview & First Quarter 2022 Highlights” of Air Canada’s First Quarter 2022 MD&A for additional information on such changes.

On March 17, 2022, the Government of Canada announced additional changes that came into effect on April 1, 2022, allowing for fully vaccinated travellers to no longer be required to provide a pre-entry COVID-19 test result to enter Canada by air, land or water. Foreign nationals who do not meet the requirements to be considered fully vaccinated are not able to enter Canada unless they meet an exemption set out in the Orders made under the Quarantine Act. Unvaccinated or partially vaccinated travellers allowed to enter Canada remain subject to the federal requirement to quarantine and take a COVID-19 PCR test at the time of arrival and on day eight after arrival.

Route Network and Schedule
Since the onset of the pandemic, Air Canada has actively managed its ASM capacity based on prevailing market trends and travel demand. In January 2022, in response to the emergence of the Omicron variant and the associated short-term decline in demand, Air Canada suspended flights to certain Caribbean destinations from January 24 to April 30, 2022.

In February 2022, Air Canada made the following announcements (adding to the schedule updates announced in the second half of 2021):

An expansion of its North American network for Summer 2022 that includes the launch of new service on four transborder and three domestic routes, as well as the restoration of 41 North American routes. Air Canada plans to operate to 51 Canadian and 46 U.S airports this summer and offer customers the largest network and most travel options of any Canadian carrier.
Expanded Summer 2022 international schedule with 34 routes relaunching across the Atlantic and Pacific.
Further information on the schedule updates announced in 2021 can be found in section 4 “2021 Highlights” of Air Canada’s 2021 MD&A.

New freighter order to accelerate ACC’s growth
Air Canada today also announced the acquisition of two new, factory-built Boeing 767-300F freighters. The two new aircraft are to be delivered this year and will be in addition to the eight 767-300s that are being converted for cargo operations.

“Since their entry into service, our Boeing 767-300BDSF freighters have proven their value to Air Canada and Air Canada Cargo. Today’s announcement is a further signal of our long-term commitment to freighters as we continue to adapt and grow at Air Canada Cargo. These additional factory-built 767-300F aircraft will allow Air Canada Cargo to speed up the expansion of its freighter fleet, helping provide reliable, dedicated service to key cargo routes around the world, further bolstering the capacity provided by Air Canada’s mainline fleet,” said Jason Berry, Vice President- Cargo, Air Canada.

Its Boeing 767-300 freighters allow Air Canada Cargo to offer five different main deck configurations, increasing the overall cargo capacity of each aircraft to nearly 58 tonnes or 438 cubic metres, with approximately 75 per cent of this capacity on the main deck.

The addition of freighter aircraft to Air Canada’s fleet allows Air Canada Cargo to provide consistent capacity on key air cargo routes, which will facilitate the movement of goods globally. The freighters also increase Air Canada Cargo’s capability to transport goods such as automotive and aerospace parts, oil and gas equipment, pharmaceuticals, perishables, as well as handling the growing demand for fast, reliable shipment of e-commerce goods.

“I am thrilled that Air Canada Cargo continues to be one of the fastest growing cargo carriers year over year thanks to the strength of Air Canada’s global network and the addition of dedicated freighter capacity. With the aircraft that had been temporarily converted to carry cargo in the cabin returning to passenger service, we are happy to now have two converted Boeing 767-300BDSF freighters in operation. Along with an enhanced freighter schedule, this will allow Air Canada Cargo to connect more destinations with direct freighter capacity for our forwarding partners, whom I thank for their continued loyalty,” said Berry.

For the second quarter of 2022, Air Canada plans to increase its ASM capacity by approximately 414 per cent from the same quarter in 2021 (or about 73 per cent of second quarter 2019 ASM capacity).

Air Canada is reiterating the following guidance for the full year 2022 provided in its news release dated March 30, 2022:

*Air Canada plans to increase its full year 2022 ASM capacity by about 150 per cent from 2021 ASM levels (or about 75 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, public health guidelines, and travel restrictions globally, as well as other factors, such as inflation and other cost pressures.
*For 2022, Air Canada expects adjusted cost per available seat mile (CASM)* to remain about 13 to 15 per cent above 2019 levels.
*For 2022, Air Canada expects an annual EBITDA margin* of about 8 to 11 per cent.


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