Air Canada cargo revenue falls 40% YoY

Air Canada announced first-quarter operating revenue of CA$ 4.9 billion ($3.6 billion), a 90% increase from Q1 2022 and a 10% increase from Q1 2019. However, cargo revenue dropped 40% year over year to $177 million. THE BIG PICTURE: Like most companies in the airfreight and logistics industries , Air Canada Cargo’s Q1 earnings dipped significantly. Air Canada was similarly affected by the ongoing airfreight recession that has resulted in weak demand and lower rates. BY THE NUMBERS: Despite cargo troubles, Air Canada posted a successful quarter with: An operating loss of $12.5 million, improved from a loss of $406 million YoY; Cash flows from operations of $1.1 billion; and Total liquidity of more than $7.8 billion. WHAT THEY’RE SAYING: “This is a record for our first-quarter revenue numbers,” Air Canada President and Chief Executive Michael Rousseau said during an earnings call Friday. “Our results exceeded all expectations.” This is largely due to recovering passenger operations. Passenger revenue was $3 billion, more than double Q1 2022, with a 53% increase in operating capacity. “ Air Canada Cargo continued to expand its network and fleet,” Rousseau said. The carrier operates six Boeing 767 dedicated freighters, as of March 31, compared to one Boeing 767 dedicated freighter as of March 31, 2022. The carrier plans to add one more freighter to the fleet this year, according to Chief Financial Officer Amos Kazzaz . FLASHBACK: The carrier’s cargo division began to offer in Q1: Weekly freighter service to Punta Cana, Dominican Republic, and Liege, Belgium; and Two weekly flights each to Miami; Atlanta; and Basel, Switzerland. “We continue to grow and deploy our cargo,” Mark Galardo , executive vice president of revenue, cargo and network/routes, said on the earnings call. “Our cargo strategy is core to our diversification focus, as it continues to create value, carrying cargo from global freight lanes onto our wider passenger network in domestic North America and other international markets. This new and diversified revenue stream also counters some of the seasonality of the passenger business and is a key component of our future commercial strategy.” STATE OF PLAY: With an eye toward sustainability, Air Canada purchased 9.5 million liters of sustainable aviation fuel from SAF producer Neste in April. “We recently announced a new SAF purchase agreement that will see us increase the use of alternative fuels by five times,” Rousseau said. However, he said Air Canada faces an uneven competitive landscape when it comes to SAF. “Other countries have adopted various mandates and incentives for growth or production and adoption,” he said. “This is not about climate action; it is about remaining competitive and continuing to fuel our Canadian economy. To make this happen, government involvement and support is required as we see in other countries.” NOTEWORTHY: The Friday earnings call was the last for Kazzaz, who will retire at the end of June. Kazzaz has been with the carrier for 13 years. “Alas, this is my final earnings call,” Kazzaz said. “I’ve enjoyed all of them and will miss discussing our results with you as we continue our recovery and will be following Air Canada’s progress from the sidelines very closely.” John Di Bert will become the carrier’s CFO. Additionally, the Friday earnings call was the first for new EVPs Galardo and Mark Nasr . Nasr is EVP of marketing and digitalization, as well as president of Aeroplan , Air Canada’s loyalty program. “They’re excellent leaders and will be critical to both our short-term and long-term future,” Rousseau said of Di Bert, Galardo and Nasr. FUTURE LOOK: Air Canada executives expect the carrier to have a successful rest of the year, especially in passenger revenue. “Looking ahead to the rest of the year, we continue to see solid event bookings in all markets,” Galardo said. “The system book load factor is trending ahead of 2019. And, as we look into summer, our new routes to Copenhagen, to Brussels and Amsterdam, are performing to or above expectations.” THE BOTTOM LINE: “We are very pleased with the results of the first quarter,” Rousseau said. “But as any sports fan knows, one good period or a strong quarter doesn’t mean you can relax for the rest of the game. For this reason, we intend to remain tightly focused on our operations.”

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