Air Canada Reports Fourth Quarter and Full Year 2023 Financial Results

  • Record full year operating revenues of $21.833 billion, reflecting strong demand for air travel
  • Full year operating income of $2.279 billion
  • 2023 adjusted EBITDA of $3.982 billion, at the high-end of guidance range
  • 2023 cash from operating activities of $4.320 billion and free cash flow of $2.756 billion 
  • Leverage ratio of 1.1 at December 31, 2023, down from 5.1 at December 31, 2022

MONTREAL, Feb. 16, 2024 /CNW/ – Air Canada today reported its fourth quarter and full year 2023 financial results.

“Air Canada produced very strong results for the fourth quarter and full year 2023, delivering on its key financial goals and strategic priorities. For the full year, we had record operating revenues of $21.8 billion, up 32 per cent from 2022 as demand for air travel remained strong. Annual operating income was $2.3 billion; a $2.5 billion improvement from the previous year. Our adjusted EBITDA was nearly $4 billion; more than twice that of full year 2022. These results stem from the effective management, hard work and customer centric approach of everyone at Air Canada. I thank the entire team for their dedication as we safely transported more than 46 million passengers in 2023. The focus on operational improvements was evident as, even with the growth in traffic and ongoing supply chain challenges, our key operational metrics and customer satisfaction improved year over year,” said Michael Rousseau, President and Chief Executive Officer of Air Canada.

“We also took important steps during the year to enable ourselves to continue performing consistently as we remain firmly committed to our plan and to enhancing our level of customer service, improving our operational reliability, strategically adding to our key hubs and network and growing profitably. We strengthened our balance sheet, reduced our debt and, despite the continuing macroeconomic and structural cost pressures on our industry, our unit costs were contained within our adjusted CASM guidance. Additionally, we will continue to expand Aeroplan, a key driver of customer loyalty that has doubled its membership to eight million members over the last five years.

 “Our airline remains adaptable to changing business conditions, and is poised to take advantage of opportunities, giving us every confidence for the year ahead.  As we look into the future, we aim to grow, deliver on our financial objectives and create long-term value for all stakeholders.”

Fourth Quarter 2023 Financial Results

The following is an overview of Air Canada’s results of operations and financial position for the fourth quarter 2023 compared to the fourth quarter 2022.

  • Operating revenues of $5.175 billion increased $495 million or 11 per cent on an operated capacity growth of over 9 per cent year over year, close to the guidance provided in Air Canada’s news release dated October 30, 2023.
  • Operating expenses of $5.096 billion increased $388 million or 8 per cent. The increase was due to higher costs in nearly all line items reflecting higher operated capacity and traffic year over year, including higher wages, salaries and benefits. The increase was partially offset by lower aircraft fuel expense on a jet fuel price decline.
  • Operating income of $79 million, with an operating margin of 1.5 per cent, improved $107 million.
  • Adjusted EBITDA of $521 million, with an adjusted EBITDA margin* of 10.1 per cent, improved $132 million.
  • Net income of $184 million and diluted earnings per share of $0.41 compared to a net income of $168 million and diluted earnings per share of $0.41.
  • Adjusted net loss* of $44 million and adjusted loss per diluted share of $0.12 compared to an adjusted net loss of $217 million and adjusted loss per diluted share of $0.61.
  • Adjusted CASM* of 14.25 cents compared to 13.68 cents, an increase of 4.1 per cent driven by higher salaries, wages and benefits expenses, higher maintenance costs and general inflationary pressures on certain line items.
  • Net cash flows from operating activities of $985 million increased $338 million.
  • Free cash flow of $669 million increased $349 million. 

Full Year 2023 Financial Results

The following is an overview of Air Canada’s results of operations and financial position for the full year 2023 compared to the full year 2022.

  • Operating revenues of $21.833 billion increased $5.277 billion or 32 per cent on approximately a 20 per cent growth in operated capacity. The capacity increase was in-line with the guidance provided in Air Canada’s news release dated October 30, 2023.
  • Operating expenses of $19.554 billion increased $2.811 billion or 17 per cent. The increase was primarily due to increases in all line items reflecting higher operated capacity and traffic year over year, including, higher salaries, wages and benefits. It also reflects the impact of a favourable maintenance cost adjustment of $159 million that was recorded in the first quarter of 2022.
  • Operating income of $2.279 billion, with an operating margin of 10.4 per cent, improved $2.466 billion.
  • Adjusted EBITDA of $3.982 billion, with an adjusted EBITDA margin* of 18.2 per cent, improved $2.525 billion, at the high end of the guidance provided in Air Canada’s news release dated October 30, 2023.
  • Net income of $2.276 billion and diluted earnings per share of $5.96 compared to a net loss of $1.7 billion and diluted loss per share of $4.75.
  • Adjusted net income of $1.713 billion and adjusted earnings per diluted share of $4.56 compared to an adjusted net loss of $988 million and an adjusted loss per diluted share of $2.76.
  • Adjusted CASM of 13.49 cents compared to 13.21 cents in 2022, a 2.2 per cent increase driven by higher traffic and selling costs correlated to higher revenues, higher labour costs, a favourable maintenance cost adjustment recorded in 2022, and inflationary pressure on certain line items. This was within the guidance range provided in Air Canada’s news release dated October 30, 2023.
  • Net cash flows from operating activities of $4.320 billion increased $1.952 billion.
  • Free cash flow of $2.756 billion increased $1.960 billion.
  • Net debt to adjusted EBITDA ratio* was 1.1 at December 31, 2023, an improvement from 5.1 as at December 31, 2022, due to the increase in adjusted EBITDA and a $2.9 billion reduction in net debt. 

Outlook 

For the first quarter of 2024, Air Canada plans to increase its ASM capacity by about 10 per cent from the same quarter in 2023.

Air Canada is providing the following guidance for the full year 2024, replacing prior 2024 targets:

MetricFull Year 2024 Guidance
ASM capacity6 to 8 per cent increase versus 2023
Adjusted CASM2.5 to 4.5 per cent increase versus 2023
Adjusted
EBITDA
$3.7 to $4.2 billion

Adjusted CASM is reconciled to GAAP operating expense as follows:

(Canadian dollars in millions, except where indicated)Fourth QuarterFull Year
20232022Change20232022Change
Operating expense – GAAP$5,096$4,708$388$19,554$16,743$2,811
Adjusted for:            
Aircraft fuel (1,391) (1,459) 68 (5,318) (5,276) (42)
Ground package costs (177) (163) (14) (720) (474) (246)
Impairment of assets     (4) 4
Freighter costs (excluding fuel) (46) (27) (19) (157) (86) (71)
Operating expense, adjusted for the
above-noted items
$3,482$3,059$423 13,359 10,903 2,456
ASMs (millions) 24,439 22,368 9.3 % 99,012 82,558 19.9 %
Adjusted CASM (cents)¢14.25¢13.68¢0.57¢13.49¢13.21¢0.28

EBITDA, adjusted EBITDA and adjusted EBITDA margin are reconciled to GAAP operating income (loss) as follows:

 Fourth QuarterFull Year
(Canadian dollars in millions, except where
indicated)
20232022Change20232022Change
Operating loss – GAAP$79$(28)$107$2,279$(187)$2,466
Add back:            
Depreciation and amortization 442 417 25 1,703 1,640 63
EBITDA$521$389$132$3,982$1,453$2,529
Remove:            
Impairment of assets     4 (4)
Adjusted EBITDA$521$389$132$3,982$1,457$2,525
Operating revenues$5,175$4,680$495$21,833$16,556$5,277
Operating margin (%) 1.5 (0.6) 2.1 pp 10.4 (1.1) 11.5 pp
Adjusted EBITDA margin (%) 10.1 8.3 1.8 pp 18.2 8.8 9.4 pp

Adjusted pre-tax income (loss) is reconciled to GAAP income (loss) before income taxes as follows:

(Canadian dollars in millions)Fourth QuarterFull Year
20232022$ Change20232022$ Change
Income (loss) before income taxes –
GAAP
$122$146$(24)$2,212$(1,524)$3,736
Adjusted for:            
Impairment of assets     4 (4)
Foreign exchange (gain) loss (72) (316) 244 (389) 732 (1,121)
Net interest relating to employee benefits (7) (7)  (25) (24) (1)
Gain on financial instruments recorded at
fair value
 (91) (44) (47) (115) (133) 18
Loss on debt settlements and modifications 1 31 (30) 10 14 (4)
Gain on disposal of assets  (21) 21  (21) 21
Adjusted pre-tax income (loss)$(47)$(211)$164$1,693$(952)$2,645

Adjusted net income (loss) and adjusted earnings (loss) per share are reconciled to GAAP net income as follows:

(Canadian dollars in millions)Fourth QuarterFull Year
20232022$ Change20232022$ Change
Net income (loss) – GAAP$184$168$16$2,276$(1,700)$3,976
Adjusted for:            
Impairment of assets     4 (4)
Foreign exchange (gain) loss (72) (316) 244 (389) 732 (1,121)
Net interest relating to employee benefits (7) (7)  (25) (24) (1)
Gain on financial instruments recorded at
fair value
 (91) (44) (47) (115) (133) 18
Loss on debt settlements and modifications 1 31 (30) 10 14 (4)
Gain on disposal of assets  (21) 21  (21) 21
Income tax, including for above reconciling
items (1)
 (59) (28) (31) (44) 140 (184)
Adjusted net income (loss)$(44)$(217)$173$1,713$(988)$2,701
Weighted average number of outstanding
shares used in computing diluted income
per share (in millions)
 358 358  376 358 18
Adjusted loss per share – diluted$(0.12)$(0.61)$0.49$4.56$(2.76)$7.32

The table below reconciles free cash flow to net cash flows from (used in) operating activities for the periods indicated.

 Fourth QuarterFull Year
(Canadian dollars in millions)20232022$ Change20232022$ Change
Net cash flows from operating activities$985$647$338$4,320$2,368$1,952
Additions to property, equipment, and
intangible assets
 (316) (327) 11 (1,564) (1,572) 8
Free cash flow$669$320$349$2,756$796$1,960

Net Debt to Trailing 12-Month Adjusted EBITDA (Leverage Ratio)

(Canadian dollars in millions)December 31,
2023
December 31,  
2022
Change
Total long-term debt and lease liabilities$12,996$15,043$(2,047)
Current portion of long-term debt and lease liabilities 866 1,263 (397)
Total long-term debt and lease liabilities (including current
portion)
 13,862 16,306 (2,444)
Less cash, cash equivalents and short and long-term
investments
 (9,295) (8,811) (484)
Net debt$4,567$7,495$(2,928)
Adjusted EBITDA (trailing 12 months)$3,982 1,457 2,525
Net debt to adjusted EBITDA ratio 1.1 5.1 (4.0)

For further information on Air Canada’s public disclosure file, including Air Canada’s 2022 Annual Information Form dated February 25, 2023, consult SEDAR+ at www.sedarplus.com.

About Air Canada

Air Canada is Canada’s largest airline, the country’s flag carrier and a founding member of Star Alliance, the world’s most comprehensive air transportation network. Air Canada provides scheduled service directly to more than 180 airports in Canada, the United States and Internationally on six continents. It holds a Four-Star ranking from Skytrax. Air Canada’s Aeroplan program is Canada’s premier travel loyalty program, where members can earn or redeem points on the world’s largest airline partner network of 45 airlines, plus through an extensive range of merchandise, hotel and car rental partners. Its freight division, Air Canada Cargo, provides air freight lift and connectivity to hundreds of destinations across six continents using Air Canada’s passenger and freighter aircraft.  Air Canada aims to achieve an ambitious net zero emissions goal from all global operations by 2050.