Despite economic challenges in Western Canada and increased pressure from WestJet Airlines Ltd., Air Canada will continue focusing on international routes after a record 2016, which saw it carry nearly 45 million passengers worldwide.
That’s up 13 per cent from 2015, the company said on Friday as it reported fourth-quarter financials. The carrier launched 28 routes around the world last year, and has 18 new routes on track for the 2017.
Air Canada has become the leading carrier in all markets where it competes directly with Transat A.T. – its chief Canadian transatlantic competitor – thanks to discount line Rouge, president of passenger airlines Benjamin Smith said.
Despite growing competition on regional routes – particularly from WestJet, which this week announced an aggressive expansion in Quebec – Air Canada also boosted domestic revenue through incremental traffic from international connections. “This has given us confidence to further build our network in 2017,” Mr. Smith said.
While declaring a “record year” for revenue, Montreal-based Air Canada booked a final loss of $179-million or 66 cents a share in the fourth quarter of 2016 – widening 54 per cent over the previous year.
The airline’s annual profit was $876-million or $3.10 per share in 2016, rising from $308-million or $1.03 in 2015.
It reported an annual adjusted profit of $1.15-billion, or $4.06 per share, down from $1.22-billion, or $4.18.
The company reported a record year for revenue – posting earnings before interest, taxes, depreciation, amortization and aircraft rent, or EBITDAR, excluding special items – after bringing in $2.77-billion, a 9-per-cent increase over 2015.
“We’ve improved our overall flexibility and competitiveness through careful cost controls, and are now well-positioned to compete in an ever-evolving and dynamic business environment,” Calin Rovinescu, the company’s chief executive officer, said on the Friday call with analysts.
Macquarie analyst Konark Gupta praised the company for its “strong results” on the call.
To mark its 80th anniversary, Air Canada unveiled earlier this month a rebranded look for its livery and fleet, refocusing its palette on black and charcoal grey while splashing its signature red on its maple-leaf logo and accessories.
Air Canada’s fuel cost per litre fell by 14.5 cents in 2016 to 53.9 cents. While the company said it expected to hit revenue targets for the next full year, it warned investors rising fuel costs could cut the forthcoming quarter’s margins by as much as half from the same period in 2016.
Its adjusted cost per available seat mile, excluding fuel and other expenses, fell 3 per cent last year over 2015.
The company expects 2017 to be another growth year, but executives cautioned on the call it was also the final year of a three-year growth plan, and that capacity would start declining in the year’s second half, slowing growth into 2018.
Mr. Rovinescu said heightened competition from WestJet in Quebec – Air Canada’s home turf – would not dissuade the company.
“The main focus of our growth has been in international markets,” he said. “We have many domestic routes [that] we consider to be extremely important, however, that provide the backbone for some of the connecting traffic that we take on internationally. So we’ll assess and respond in the fullness of time.
“These are markets that we know well, and we certainly have not ever expected any market belongs to us.”
When Cowen and Co. analyst Helane Becker asked about what happens when U.S. “rhetoric heats up” – hinting at the possibility of economic instability under the Donald Trump administration – Mr. Smith declined to answer directly, but noted the low Canadian dollar has maintained “increased interest” in Americans using the airline to visit Canada. In fact, he said, U.S.-bound travel from Canadians is “holding up nicely” despite the unfavourable exchange rate.
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