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Report on Business Air Canada scraps financial outlook for 2019 after grounding of Boeing 737 Max aircraft

An Air Canada Boeing 737 MAX 8 from San Francisco approaches for landing at Toronto Pearson International Airport over a parked Air Canada Boeing 737 MAX 8 aircraft, March 13, 2019. REUTERS/Chris Helgren

CHRIS HELGREN/Reuters

Air Canada says it is suspending its financial guidance for 2019 after the grounding of the Boeing 737 Max aircraft involved in two deadly crashes in five months.

Montreal-based Air Canada on Friday morning withdrew its outlook issued in February for the first quarter and full year of 2019 “in light of the current uncertainty” over the planes that carry as many as 12,000 of its customers a day.

Transport Canada, the U.S. Federal Aviation Authority and other major governing bodies barred the flights of the two-year-old 737 Max after the crash of an Ethiopian Airlines plane shortly after takeoff on Sunday that killed 157 people. The erratic flight path appeared similar to a fatal Lion Air crash in October. The pilot of that plane reported control problems.

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The investigations into both 737 Max crashes are under way, and expected to focus on the automated controls.

Both major Canadian airlines relied heavily on the 737 Max planes, and warned the groundings would cause delays and disruptions as they deployed other aircraft.

Air Canada has about 24 737 Max planes that have been grounded, and was due to take delivery of another 18 or so in 2019. Calgary-based WestJet Airlines Ltd.’s fleet includes 13 737 Max planes.

Boeing Co. suspended deliveries of the 737 Max planes and has not said when it will be able to address regulators’ concerns with the planes.

Fadi Chamoun, a Bank of Montreal analyst, said the groundings affect about 7 per cent of Air Canada’s capacity, driving costs higher. “We continue to see this as a short-term issue and would buy [the company’s shares] on weakness,” Mr. Chamoun said.

Walter Spracklin, a Royal Bank of Canada analyst, said Air Canada’s move was expected, and noted the carrier has not altered its long-term targets. “We view the interruptions from the 737 Max grounding as a temporary one,” he said in a note to clients.

For 2019, Air Canada was forecasting an increase in one measure of costs of between 2 and 3 per cent, earnings before interest taxes depreciation and expenses margin 19 to 22 per cent.

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Air Canada’s share price fell by 3 per cent in the first four days of this week. The company announced the guidance suspension before markets opened on Friday.

Air Canada’s share price fell by 0.72 per cent Friday. WestJet’s stock price ended down.

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