(Reuters) -Air Canada reported a better than expected quarterly profit on Friday compared with a year-ago loss and sees solid passenger bookings into early 2024 as the country’s largest airline cashes in on strong international travel demand.
A rush by North American travelers to make up for lost time during the pandemic has bolstered earnings for legacy carriers, with international destinations enjoying especially high demand.
The carrier raised the lower end of its earlier 2023 guidance of C$3.5 billion to C$4 billion for earnings before interest, taxes, depreciation and amortization (EBITDA) to C$3.75 billion. The stock rose about 4% in opening trades, but quickly gave up most of its gains.
Chief Executive Mike Rousseau said advanced passenger bookings remain solid for the balance of 2023 and into the first quarter of 2024.
But North American carriers face pressure from higher labor costs, with pilots demanding steep pay increases in new contracts. Air Canada pilots are in talks with the carrier, with their contract set to expire at the end of September, their union said.
Air Canada reported some relief in jet fuel prices which fell 31.4% during the second quarter.
Montreal-based Air Canada said it expects to grow available seat mile capacity for 2023 by 21% compared with a year earlier.
The carrier wants to fly more American passengers on non-direct international routes through stops at its Canadian hubs. So-called sixth freedom revenues, generated from carrying passengers from a second country to a third via a stop in a local hub, were the strongest in the second quarter that Air Canada has ever achieved, the carrier said.
For the quarter ended June 30, Air Canada reported adjusted net income of C$664 million ($493.97 million), or C$1.85 per diluted share. Analysts on average had expected adjusted net income of C$289.8 million or 68 Canadian cents a share according to data from Refinitiv.
For 2023, the carrier is now expecting costs per available seat mile (CASM) of about 0.5% to 1.5% above 2022 levels. In May, Air Canada said it expected CASM of about 0.5% to 2.5% below 2022 levels.
($1 = 1.3442 Canadian dollars)
(Reporting by Shivansh Tiwary and Priyamvada C in Bengaluru and Allison Lampert in Montreal; Editing by Devika Syamnath,Frances Kerry, Elaine Hardcastle)