Leading Canadian carrier, Air Canada has reported record revenues for 2019 despite the fall out from the grounding of the firms Boeing 737 max aircraft.
The airline reported earnings before interest, taxes, depreciation, amortization and impairment of $3.636 billion up from $3.213 billion in 2018. The carrier managed to achieve operating income of $1.650 billion in 2019 compared to operating income of $1.496 billion in 2018.
Air Canada expects that six of 12 undelivered Boeing 737 MAX aircraft originally scheduled for delivery in 2019 will be delivered in 2020 with the remaining six delivered in 2021, and that 14 undelivered Boeing 737 MAX aircraft originally scheduled for delivery in 2020 will be delivered in 2021. Whilst no firm date is yet available for the return of the 737 MAX aircraft to the schedules, the airline believes it will gradually return to service commencing late in the third quarter of 2020.
"I am very pleased to report strong fourth-quarter and full-year results for 2019, a year in which we generated record revenues in excess of $19 billion and reached record levels of unrestricted liquidity, despite the loss to Air Canada of approximately 25 per cent of our narrow-body fleet for most of the year following the worldwide grounding of the Boeing 737 MAX. These results underscore the airline's ability to overcome major challenges as well as the deep commitment of Air Canada's 37,000 strong team, which took care of our customers under extremely complicated operational circumstances. With this backdrop, I am especially proud that we were able to deliver on the outlook we provided for key financial metrics for the year. Our discipline was rewarded by an 87 per cent return on our shares in 2019, which, when added to our returns over the previous nine years, made Air Canada the top-performing stock on the TSX for the past decade with a 3,575 per cent return," said Calin Rovinescu, President and Chief Executive Officer of Air Canada.
"The agility and consistency that we displayed in 2019 gives me confidence that we will successfully execute on the several key opportunities now before us. This includes the launch of our new loyalty program later this year, which we expect will be the best airline loyalty program in the world. We also look forward to completing our proposed merger with Transat A.T., which was approved by nearly 95 per cent of Transat shareholders last summer and now remains subject to applicable regulatory approvals. This is a wholly Canadian solution that will secure jobs and result in more travel options and benefits for both airlines' customers and other stakeholders.
"We start 2020 with uncertainty from the on-going Boeing 737 MAX grounding and the constraints it imposes, as well as emerging economic and geopolitical risks and route suspensions resulting from the COVID-19 virus. However, our strong balance sheet, globe-spanning network that diversifies our revenue sources, brand strength as North America's Best Airline as rated by Skytrax, young fleet, dedicated and talented employees and nimble management team equip us to respond effectively to any challenges that come our way. Our dedicated and professional team is highly motivated to deliver service excellence to our loyal customer base, and I thank both groups for contributing to our strong 2019 results in the face of adversity," said Mr. Rovinescu.
HIGHLIGHTS
The financial and operating highlights for Air Canada for the periods indicated are as follows:
(Canadian dollars in millions, except where indicated)
|
Fourth Quarter
|
Full Year
| ||||||||||
2019 (1)
|
2018
|
$ Change
|
2019 (1)
|
2018
|
$ Change
| |||||||
Financial Performance Metrics
| ||||||||||||
Operating revenues
|
4,429
|
4,227
|
202
|
19,131
|
18,003
|
1,128
| ||||||
Operating income
|
145
|
179
|
(34)
|
1,650
|
1,496
|
154
| ||||||
Income (loss) before income taxes
|
172
|
(391)
|
563
|
1,775
|
228
|
1,547
| ||||||
Net income (loss)
|
152
|
(360)
|
512
|
1,476
|
37
|
1,439
| ||||||
Adjusted pre-tax income (2)
|
66
|
68
|
(2)
|
1,273
|
1,036
|
237
| ||||||
Adjusted net income (2)
|
47
|
55
|
(8)
|
917
|
738
|
179
| ||||||
Operating margin %
|
3.3%
|
4.2%
|
(0.9) pp
|
8.6%
|
8.3%
|
0.3 pp
| ||||||
EBITDA (2)
|
665
|
619
|
46
|
3,636
|
3,213
|
423
| ||||||
EBITDA margin % (2)
|
15.0%
|
14.6%
|
0.4 pp
|
19.0%
|
17.8%
|
1.2 pp
| ||||||
Unrestricted liquidity (3)
|
7,380
|
5,725
|
1,655
|
7,380
|
5,725
|
1,655
| ||||||
Net cash flows from operating activities
|
677
|
548
|
129
|
5,712
|
3,470
|
2,242
| ||||||
Free cash flow (2)
|
426
|
288
|
138
|
2,075
|
1,327
|
748
| ||||||
Net debt (2)
|
2,841
|
5,214
|
(2,373)
|
2,841
|
5,214
|
(2,373)
| ||||||
Return on invested capital ("ROIC") % (2)
|
15.5%
|
13.5%
|
2.0 pp
|
15.5%
|
13.5%
|
2.0 pp
| ||||||
Leverage ratio (2)
|
0.8
|
1.6
|
(0.8)
|
0.8
|
1.6
|
(0.8)
| ||||||
Diluted earnings (loss) per share
|
$
|
0.56
|
$
|
(1.33)
|
$
|
1.89
|
$
|
5.44
|
$
|
0.13
|
$
|
5.31
|
Adjusted earnings per share – diluted (2)
|
$
|
0.17
|
$
|
0.20
|
$
|
(0.03)
|
$
|
3.37
|
$
|
2.67
|
$
|
0.70
|
Operating Statistics (4)
|
% Change
|
% Change
| ||||||||||
Revenue passenger miles ("RPM") (millions)
|
21,403
|
20,801
|
2.9
|
94,113
|
92,360
|
1.9
| ||||||
Available seat miles ("ASM") (millions)
|
26,431
|
25,597
|
3.3
|
112,814
|
110,866
|
1.8
| ||||||
Passenger load factor %
|
81.0%
|
81.3%
|
(0.3) pp
|
83.4%
|
83.3%
|
0.1 pp
| ||||||
Passenger revenue per RPM ("Yield") (cents)
|
18.6
|
18.2
|
2.3
|
18.3
|
17.5
|
4.6
| ||||||
Passenger revenue per ASM ("PRASM") (cents)
|
15.0
|
14.7
|
2.0
|
15.3
|
14.6
|
4.8
| ||||||
Operating revenue per ASM (cents)
|
16.8
|
16.5
|
1.5
|
17.0
|
16.2
|
4.4
| ||||||
Operating expense per ASM ("CASM") (cents)
|
16.2
|
15.8
|
2.5
|
15.5
|
14.9
|
4.1
| ||||||
Adjusted CASM (cents) (2)
|
11.7
|
11.1
|
5.5
|
10.9
|
10.3
|
6.1
| ||||||
Average number of full-time equivalent ("FTE")
employees (thousands) (5)
|
33.3
|
30.5
|
9.2
|
32.9
|
29.9
|
10.1
| ||||||
Aircraft in operating fleet at period-end (6)
|
403
|
400
|
0.8
|
403
|
400
|
0.8
| ||||||
Average fleet utilization (hours per day)
|
10.1
|
9.7
|
3.8
|
10.6
|
10.4
|
2.1
| ||||||
Seats dispatched (thousands)
|
15,506
|
15,184
|
2.1
|
64,653
|
63,800
|
1.3
| ||||||
Aircraft frequencies (thousands)
|
130.3
|
137.7
|
(5.4)
|
548.5
|
578.9
|
(5.3)
| ||||||
Average stage length (miles) (7)
|
1,705
|
1,686
|
1.1
|
1,745
|
1,738
|
0.4
| ||||||
Fuel cost per litre (cents)
|
75.0
|
84.3
|
(11.0)
|
76.1
|
80.4
|
(5.4)
| ||||||
Fuel litres (thousands)
|
1,349,573
|
1,293,063
|
4.4
|
5,713,924
|
5,597,232
|
2.1
| ||||||
Revenue passengers carried (thousands) (8)
|
12,048
|
11,909
|
1.2
|
51,543
|
50,904
|
1.3
| ||||||
(1)
|
Air Canada began consolidating Aeroplan Inc.'s (formerly, Aimia Canada Inc, "Aeroplan") financial results on January 10, 2019, the date of its acquisition of Aeroplan. Refer to section 14 "Accounting Policies" and section 15 "Critical Accounting Estimates and Judgements" of Air Canada's 2019 MD&A for additional information.
|
(2)
|
Adjusted pre-tax income (loss), adjusted net income (loss), EBITDA (earnings before interest, taxes, depreciation and amortization), EBITDA margin, free cash flow, ROIC, leverage ratio, adjusted earnings (loss) per share–diluted and adjusted CASM are each non-GAAP financial measures and net debt is an additional GAAP measure. Refer to section 22 of Air Canada's 2019 MD&A for descriptions of Air Canada's non-GAAP financial measures and additional GAAP measures.
|
(3)
|
Unrestricted liquidity refers to the sum of cash, cash equivalents and short and long-term investments, and the amount of available credit under Air Canada's revolving credit facilities. At December 31, 2019, unrestricted liquidity was comprised of cash, cash equivalents and short-term investments of $5,889 million, long-term investments of $512 million and undrawn lines of credit of $979 million. At December 31, 2018, unrestricted liquidity was comprised of cash, cash equivalents and short-term investments of $4,707 million and undrawn lines of credit of $1,018 million.
|
(4)
|
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 Air Canada.
|
(5)
|
Reflects FTE employees at Air Canada and its subsidiaries. Excludes FTE employees at third party carriers operating under capacity purchase agreements with Air Canada.
|
(6)
|
At December 31, 2019, the number of aircraft in Air Canada's operating fleet included 24 Boeing 737 MAX aircraft which are grounded and excluded aircraft under wet lease arrangements. Refer to section 9 "Fleet" of Air Canada's 2019 MD&A for additional information.
|
(7)
|
Average stage length is calculated by dividing the total number of available seat miles by the total number of seats dispatched.
|
(8)
|
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.
|
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