Air Canada's fourth-quarter passenger revenue increased 5.3 percent year over year to $3.98 billion as the carrier faced continued cost and network challenges related to the Boeing 737 Max grounding.
For the quarter, Air Canada's traffic was up 2.9 percent year over year, and capacity was up 3.3 percent, pushing load factor down 0.3 percentage points to 81 percent. Air Canada EVP and chief commercial officer Lucie Guillemette in an earnings call said domestic traffic was down slightly year over year due to "a weaker Western Canadian market, transitional impact created from the cutover to our new [Amadeus Altea reservations] system and less connecting traffic as a result of scheduled adjustments related to the Max grounding."
Fourth-quarter U.S. transborder traffic also was down 1 percent year over year due to reduced capacity to Hawaii and certain long-haul routes affected by the Max grounding, Guillemette said.
Transatlantic capacity, however, was up 7 percent year over year during the quarter, and traffic was up on all major routes with the exception of services suspended due to the Max grounding, including Halifax and St. John's to the United Kingdom, according to Guillemette.
Air Canada's transatlantic capacity growth has been "an intentional strategy to reduce our exposure in Asia and to invest in the very stable North Atlantic," Guillemette said. That strategy will continue with reallocation of capacity due to the hit on China and Hong Kong traffic related to the coronavirus outbreak. As such, transatlantic fares could face some pressure in the coming months, Cowen and Co. analyst Helane Becker said in a research note.
"Demand in [the Atlantic region] has been strong, so absorption of the incremental capacity will likely occur, but there will probably be some competitive responses to the increases in capacity, which may result in modes yield declines in the Atlantic market," she said.
In the fourth quarter, Air Canada saw transatlantic yields decline 1.8 percent year over year due to "competitive pricing activities," Guillemette said.
Air Canada in the fourth quarter also began refurbishing its Airbus A330 fleet to "bring it up to the same standards as our Boeing 787 and Boeing 777" aircraft, she said, with work expected to be completed within the next year.
For the fourth quarter, Air Canada reported a net income of $152 million Canadian, compared with a $391 million Canadian loss in the fourth quarter of 2018. The fourth quarter of 2018 included heavy foreign exchange losses. For the full year, Air Canada's net income was $1.48 billion Canadian, up from $37 million Canadian in 2018.
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