Beset by operational challenges that have spurred the cancellation of more than 150 flights in July and August, Air Canada on Tuesday said it would take additional measures in the third quarter to improve its performance. Meanwhile, executives on a Tuesday earnings call said the carrier's business travel traffic has passed 60 percent of 2019 levels and further growth is expected in the fall.
"We started seeing signs of recovery in corporate travel in March of 2022, and this accelerated through June, from close to 40 percent of 2019 levels to over 60 by the end of June," Air Canada EVP and chief commercial officer Lucie Guillemette said. "We expect the corporate traffic to continue its rebound post Labor Day, building on the strength we saw in June."
Guillemette said Air Canada will "continue to focus on strategic initiatives to bolster our future results," including its recently announced plan for an expanded transborder joint business agreement with longtime partner United Airlines.
Operational Woes
Air Canada EVP and COO Craig Landry apologized for the carrier's second-quarter operational performance, citing increased flight cancellations, delays—airline analytics firm Cirium indicated only 38 percent of North American Air Canada flights in June arrived on time—and mishandled baggage.
Landry and president and CEO Michael Rousseau cited as reasons for the operational problems some of the same factors that have challenged carriers and airports in Europe and other parts of the world, including rapidly escalating demand, persistent supply chain disruptions and staffing shortages, and other problems at aviation-related businesses like air traffic control, maintenance and catering providers.
Landry suggested some factors were unique to Canada, particularly the rebound's sharp incline due to the stringency of the country's Covid-19 travel restrictions. The situation "is somewhat unique when we look at other global markets where travel recovery grew more evenly through 2021 and into 2022," he said. "In Canada, it happened in a much shorter period, as travel restrictions were in place for a longer period, holding back pent-up demand that much longer." He also pointed to "a series of mechanical failures at the airport baggage handling systems at some of our key hubs."
To counter the operational challenges, Air Canada in June cut 154 flights from its schedule in July and August, about 8 percent of its systemwide scheduled flights, Landry said. He added that the "operation control team is collaborating with other key branches to focus on key flights during peak connection banks," and the carrier is "reviewing certain ancillary policies and services that can ease our operation in the immediate term."
"As a result of these measures, and the increased focus and support being seen everywhere through the air transport system, we've already seen improvements on all key operational metrics," Landry said.
Q2 Metrics
Air Canada's second-quarter passenger revenue increased to C$3.44 billion (US$2.68 billion), up from C$426 million in the second quarter of 2021 and represented about 80 precent of those generated in Q2 2019. Total revenue increased to C$3.98 billion from C$837 million one year prior. The carrier's second-quarter operating loss was C$253 million, compared with C$1.13 billion in Q2 2021.
Air Canada said it expects its third-quarter capacity, as measured in available seat miles, to increase 131 percent year over year, to about 79 percent of the ASM capacity of the third quarter of 2019.
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