Boeing 737 Max 8 weighs on Air Canada forecasts

The flight ban still in effect for the Boeing 737 Max 8s is a challenge for Air Canada, which expects to carry fewer passengers in the third quarter – the heart of the summer season.
In addition, the company based in Montreal will have to wait until at least January 8, four months longer than the previous schedule, before they can hope to see these aircraft re-enter the fleet.

But despite an anticipated two per cent decline in capacity in the third quarter, when previously expected to grow by three per cent, Air Canada plans to deliver earnings before interest, taxes, depreciation and amortization up five per cent. – about $ 1.33 billion.

These forecasts were unveiled by the country’s largest airline on Tuesday when it released its second-quarter results, where it posted adjusted earnings that exceeded analysts’ expectations. Its revenues also jumped about 10 percent to a record $ 4.76 billion for this period.

“Although we anticipate a good third quarter, it will not be as good as it could have been,” Air Canada President and CEO Calin Rovinescu warned at a conference. telephone.

This one did not want to quantify the financial impact attributable to the prohibition of the flight which strikes the apparatuses built by Boeing, saying not to want to negotiate publicly with the American manufacturer. Twenty-four Boeing 737 Max 8s are currently grounded. The company expects to operate 36 aircraft in late June and have received about 50 aircraft in mid-2020.

When the flight ban is lifted, it could take up to a year before the entire Air Canada Boeing 737 Max 8 fleet is fully operational, according to Michael Rousseau, chief financial officer of the airline. .

“It has been extremely frustrating to manage,” he said.

RBC Capital Markets analyst Walter Spracklin said in a note that the decline in capacity was “the bright side” and that it was “a good sign for passenger products” (the average price of ‘one passenger pays per mile)’.

Crashes in October in Indonesia and in Ethiopia in March, where 346 people, including 18 Canadians, lost their lives, prompted regulators around the world to ground the Boeing 737 Max 8 and Max 9 for security reasons.

In a phone interview on Monday, WestJet CEO Ed Sims said the withdrawal of 13 Boeing 737 Max 8s from the company’s fleet would result in a “significant negative impact”, but would not go any further. .

A good bonus

Questioned by analysts, Rovinescu also briefly mentioned the agreement to acquire the Transat AT tour operator for $ 520 million, or $ 13 per share.

While some shareholders of Air Transat’s parent company felt that the price offered by Air Canada was not high enough, the airline’s big boss said the deal would benefit all stakeholders.

“This includes the shareholders of Transat, who will receive a significant premium over what the action was worth before April,” he said.

Announced in June, the deal, which is scheduled to close in early 2020, must be approved by at least two-thirds of Transat AT’s shareholders. The transaction could be hindered by a number of obstacles, including scrutiny by regulators.

In the second quarter ended June 30, Air Canada posted net income of $ 343 million, or $ 1.26 per share, compared with a loss of $ 102 million, or 37 cents per share, in the same period a year. Excluding non-recurring items, adjusted earnings were 88 cents per share, compared to 47 cents per share in the second quarter last year.

According to data compiled by Refinitiv, analysts expected an adjusted earnings per share of 76 cents on quarterly earnings of $ 4.71 billion.

On the Toronto Stock Exchange, Air Canada shares traded at $ 46.29 on Tuesday at midday, up $ 1.20, or 2.66 per cent.

Companies in this newsfeed: (TSX: AC, TSX: TRZ, TSX: WJA)

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