Total operating revenues of $5.2 billion increased 7% year over year Operating income of $11 million and adjusted EBITDA* of $453 million Double-digit on-time arrivals improvement from the first quarter of 2023 Leverage ratio* of 0.9 as at March 31, 2024 Reiterating 2024 guidance for capacity, adjusted CASM* and adjusted EBITDA* MONTREAL, May 2, 2024 /CNW/ - Air Canada today reported its first quarter 2024 financial results. "Air Canada's solid first quarter results position our airline for a strong performance in 2024. We had operating revenues of $5.2 billion in the quarter, up $339 million from last year. Adjusted EBITDA grew by $42 million year over year to $453 million. I thank our employees for their hard work taking care of our 11 million customers and transporting them safely throughout the quarter. I also commend them for improving our operations, notably a 13 percentage-point increase in system-wide, on-time arrivals, preparing us for an anticipated busy summer period," said Michael Rousseau, President and Chief Executive Officer of Air Canada.  "We are confident in our ability to deliver on our full year 2024 guidance. As we look toward the summer, we see a continued healthy demand environment, and our customers will have a wide range of exciting travel options across Europe, Asia, and North America, for their summer holiday planning.   "In the quarter, we generated over $1 billion of free cash flow, mainly resulting from cash generated from operating activities. Our net debt-to-adjusted EBITDA ratio fell to 0.9 at the quarter's end. We also made further progress in our strategy to deleverage the balance sheet by reducing gross debt. Our accomplishments in this regard have been recognized by the credit rating agency community, more recently with S&P Global Ratings' latest upgrade to 'BB' from 'BB-' at the end of April. For the full year 2024, we remain certain of our ability to generate significant free cash flow. Our strong balance sheet will serve as the foundation on which we will grow our airline through investments in our world-class global network and the deployment of capital allocation strategies that will create sustainable, long-term value, for all of Air Canada and its shareholders," said Mr. Rousseau. *Adjusted CASM, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), adjusted EBITDA margin, leverage ratio, net debt, adjusted pre-tax income (loss), adjusted net income (loss), adjusted earnings (loss) per share, and free cash flow are referred to in this news release. Such measures are non-GAAP financial measures, non-GAAP ratios, or supplementary financial measures, are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results. Refer to the "Non-GAAP Financial Measures" section of this news release for descriptions of these measures, and for a reconciliation of Air Canada non-GAAP measures used in this news release to the most comparable GAAP financial measure. First Quarter 2024 Financial Results Operating revenues of $5.226 billion increased $339 million or 7% on an operated capacity growth of 11% year over year. Operating expenses of $5.215 billion increased $311 million or 6%. The increase was due to higher costs in nearly all line items reflecting higher operated capacity and traffic year over year, in addition to higher labour, maintenance and information technology expense. Lower fuel expense partially offset the increase. Operating income of $11 million, with an operating margin of 0.2%, improved $28 million. Adjusted EBITDA of $453 million, with an adjusted EBITDA margin* of 8.7%, improved $42 million. Net loss of $81 million and diluted loss per share of $0.22 compared to net income of $4 million and diluted loss per share of $0.03. Adjusted net loss of $96 million and adjusted loss per diluted share of $0.27 compared to adjusted net loss of $188 million and adjusted loss per diluted share of $0.53. Adjusted CASM of 14.76 cents compared to 14.52 cents, an increase of 1.6% mainly driven by labour, maintenance and information technology expenses. Net cash flows from operating activities of $1.592 billion increased $155 million, with continued strong growth in advance ticket sales consistent with seasonal trends. Free cash flow* of $1.056 billion increased $69 million with continued strong growth in advance ticket sales consistent with seasonal trends. Net debt-to-adjusted EBITDA ratio was 0.9 as at March 31, 2024, compared to 1.1 as at December 31, 2023. The improvement was driven by strong free cash flow in the first quarter of 2024. Fleet update Air Canada is in the process of arranging lease agreements for some additional Boeing 737 MAX 8 aircraft that would be scheduled for delivery in 2024 and enter service in 2025, upon completion of reconfiguration.   Outlook For the second quarter of 2024, Air Canada plans to increase its ASM capacity by about 7% from the same quarter in 2023. Air Canada is reiterating the full year 2024 guidance provided in its news release dated February 16, 2024, as described below. Metric 2024 Guidance ASM capacity 6 to 8 % increase versus 2023 Adjusted CASM 2.5 to 4.5 % increase versus 2023 Adjusted EBITDA $3.7 to $4.2 billion Major Assumptions Air Canada made assumptions in preparing its guidance — including moderate Canadian GDP growth for 2024. As part of its assumptions, Air Canada now assumes that the Canadian dollar will trade, on average, at C$1.35 per U.S. dollar for the full year 2024 and that the price of jet fuel will average C$1.03 per litre for the full year 2024. Non-GAAP Financial Measures Below is a description of certain non-GAAP financial measures and ratios used by Air Canada to provide readers with additional information on its financial and operating performance. Such measures are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results. Air Canada excludes the effect of impairment of assets, if any, when calculating adjusted CASM, adjusted EBITDA, adjusted EBITDA margin, adjusted pre-tax income (loss) and adjusted net income (loss) as it may distort the analysis of certain business trends and render comparative analysis across periods or to other airlines less meaningful. Air Canada did not record charges for impairment of assets in the first quarter of 2024 or in the first quarter of 2023. Adjusted CASM Air Canada uses adjusted CASM to assess the operating and cost performance of its ongoing airline business without the effects of aircraft fuel expense, the cost of ground packages at Air Canada Vacations and freighter costs as these items may distort the analysis of certain business trends and render comparative analysis across periods less meaningful, and their exclusion generally allows for a more meaningful analysis of Air Canada's operating expense performance and a more meaningful comparison to that of other airlines. In calculating adjusted CASM, aircraft fuel expense is excluded from operating expense results as it fluctuates widely depending on many factors, including international market conditions, geopolitical events, jet fuel refining costs and Canada/U.S. currency exchange rates. Air Canada also incurs expenses related to ground packages at Air Canada Vacations, which some airlines, without comparable tour operator businesses, may not incur. In addition, these costs do not generate ASMs and therefore excluding these costs from operating expense results provides for a more meaningful comparison across periods when such costs may vary. Air Canada also incurs expenses related to the operation of freighter aircraft, which some airlines, without comparable cargo businesses, may not incur. Air Canada had eight Boeing 767 dedicated freighter aircraft in its operating fleet as at March 31, 2024, compared to seven Boeing 767 dedicated freighter aircraft in service as at December 31, 2023. These costs do not generate ASMs and therefore excluding these costs from operating expense results provides for a more meaningful comparison of the passenger airline business across periods. Adjusted CASM is reconciled to GAAP operating expense as follows: (in millions, except where indicated) First Quarter 2024 2023 Change Operating expense – GAAP $ 5,215 $ 4,904 $ 311 Adjusted for: Aircraft fuel (1,254) (1,375) 121 Ground package costs (335) (318) (17) Freighter costs (excluding fuel) (35) (31) (4) Operating expense, adjusted for the above-noted items $ 3,591 $ 3,180 $ 411 ASMs (millions) 24,337 21,907 11.1 % Adjusted CASM (cents) ¢ 14.76 ¢ 14.52 ¢ 0.24 EBITDA and Adjusted EBITDA Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) is commonly used in the airline industry and is used by Air Canada as a means to view operating results before interest, taxes, depreciation and amortization as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other assets. Adjusted EBITDA margin (adjusted EBITDA as a percentage of operating revenues) is commonly used in the airline industry and is used by Air Canada as a means to measure the operating margin before interest, taxes, depreciation and amortization as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other assets. Adjusted EBITDA and adjusted EBITDA margin are reconciled to GAAP operating income (loss) as follows: First Quarter (in millions, except where indicated) 2024 2023 Change Operating income (loss) – GAAP $ 11 $ (17) $ 28 Add back: Depreciation and amortization 442 428 14 Adjusted EBITDA $ 453 $ 411 $ 42 Operating revenues $ 5,226 $ 4,887