Despite the overall optimism of Air Canada’s first quarter results, released 27APR, analysts are predicting rising costs and weak business travel will push the airline into taking some measures to bolster its bottom line.
And travellers aren’t going to like them one bit.
As Open Jaw reported, CEO Michael Rousseau’s statement noted good news in Air Canada’s Q1 results, 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.”
On a conference call with analysts, he added, “We are very positive on the rest of the year and continued growth over the next several years.”
Nonetheless, as BNN/Bloomberg reported, Air Canada’s stock fell - 7.3 per cent.
The report quoted chief commercial officer Lucie Guillemette explaining to analysts that, even though leisure and domestic travel are on the rise, international business bookings “might take a bit longer” to recover.
She added that business travel bookings remain stalled at only half of pre-pandemic volume levels - and that Air Canada’s capacity “continues to lag its U.S. counterparts.”
Analysts seized on that news - as well as fuel prices - as “key risk” areas for the airline.
According to IATA, jet fuel costs “rose nearly 119 per cent year over year as of April 22,” although they are down a bit from their highest levels in MAR in the early days of Russia’s invasion of Ukraine.
High fuel costs have “eaten into the otherwise positive benefit of higher ticket fares," BNN/Bloomberg reports RBC analyst Walter Spracklin saying.
Air Canada’s chief financial officer made it clear that travellers are going to have to pay the price.
“The ability to pass on increases in fares and manage through optimization and cost discipline is really what's key to how we're trying to manage," Amos Kazzaz told analysts on the call.
It won’t just be higher airfares or fuel surchages, either. According to the report, Air Canada’s Guillemette noted the airline sees “another path to profitability” in ancillary fees like checked bags, paid seat selection and onboard meals as well as “commission-based offerings such as car rentals and travel insurance.”
