Air Canada reports lower Q2 profit as excess capacity, competition hurt pricing

Air Canada reported a lower Q2 profit on Wednesday (Aug. 7) as it feels the impact of excess capacity in some markets and competition on international routes.

The carrier’s profit fell to $410 million or $1.04 per share, from $838-million, or $2.34 per share, one year earlier.

“We saw healthy demand, with load factors remaining above historical averages. We remained sharply focused on our customers and operations throughout the quarter and experienced a 10-percentage point year-over-year improvement in our on-time performance, even with the increased flying,” said Michael Rousseau, president and CEO of Air Canada, in a press release, noting that the airline transported 11.6 million customers in Q2.

READ MORE: Air Canada cuts 2024 profit forecast as over-capacity impacts pricing

When compared to the second quarter of 2023, Air Canada increased its capacity 6.5 per cent during the period, Rousseau went on to say.  

“Our adjusted unit cost was well contained, increasing 1.7 per cent. This was supported through rigorous cost discipline, which is always a top priority for us,” he said. “We will continue to adapt to market conditions, manage capacity proactively and contain costs through productivity and other initiatives.”

Rousseau noted that Air Canada has diversified its network, adding services to Singapore, Stockholm and India, and has enhanced its operational flexibility by securing an additional eight Boeing 737-8 aircraft, set to enter service next year.

Air Canada updates forecast

North American airlines are struggling to uphold prices as the rush to capture the strong demand for summer travel left some with extra capacity, which, in some cases, unleashed a wave of discounts to fill empty seats.

Last month, Air Canada cut its full-year core profit forecast, citing a lower yield environment and competition on international routes. The updated outlook reflected lesser-than-expected load factors for the second half of the year, the airline said at the time.

The airline’s updated guidance additionally accounts for sustained supply chain pressures, evolving market conditions and ongoing geopolitical issues.

Looking ahead, there are other costs Air Canada will have to consider. The airline has yet to finalize a new contract with the union that represents its pilots, which might add new financial pressures.

Air Canada’s operating revenue increased by two per cent to $5.52-billion in the quarter ended June 30. It also reported an adjusted EBITDA of $914 million.

For the third quarter of 2024, Air Canada said it will increase its ASM capacity between four per cent and 4.5 per cent from the same quarter in 2023.

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