Air Canada (AC.TO) shares fell on Wednesday, as the airline’s chief executive officer told investors he’s not happy with the stock's low-flying price.
The Montreal-based carrier reported second-quarter financial results on Wednesday that were broadly in line with the lower guidance it released last month. Canada’s largest airline booked $410 million in net income, down from $838 million a year ago, citing rising competition on its lucrative international routes, and higher jet fuel costs.
Air Canada shares closed 1.39 per cent lower on Wednesday at $14.93, after dropping as much as 2.5 per cent during the session. The stock is down about 34 per cent over the past 12 months, and around 19 per cent year-to-date.
“We're disappointed with our stock price performance year-to-date, especially coming off our record 2023, and having completely repaired the balance sheet,” Michael Rousseau told analysts on a post-earnings conference call. “We also know that most local airline stocks are having similar challenges.”
Rousseau says Air Canada's latest results are compared against a unique year in 2023, marked by a “rapid post-pandemic surge in demand.”
“Our second-quarter results were solid, although they did not achieve our internal expectations,”
Still, revenue in the second quarter edged up to $5.52 billion from $5.43 billion a year ago, as the airline's overall operating capacity increased 6.5 per cent. However, passenger revenue per available seat mile, a key industry metric, fell 4.4 per cent year-over-year.
“Systemwide, again, for the third quarter of 2024, we anticipate the yield and passenger revenue per available seat mile declines will continue,” Rousseau said, adding that airport fees in Canada will continue to weigh on the company for “multiple years to come."
“Some have criticized the cost of travel in Canada,” he added. “To do so selectively, without comparing . . . other jurisdictions, is not only completely misleading and simplistic, but frankly disconcerting.”
Despite recent challenges, Air Canada says it plans to boost its available seat mile capacity in the third quarter by between four and 4.5 per cent, compared with the same quarter in 2023.
Last month, the company lowered its profit forecast due to expectations for lower-than-expected load factors, and more international competition.
Asked if current financial pressures on Canadian households pose a risk, Mark Galardo, vice-president of revenue and network planning, says there has been "no real slowdown" from Canadian consumers.
Given the recent pullback in the stock price, analysts also asked if Air Canada would leverage its strong balance sheet to opportunistic purchase of its own shares.
"We'll continue to make sure that we carry out our capital allocation strategy to do both, grow and reward shareholders," Rousseau said. "So, the answer is that is on the radar, on the high-yield list of priorities."
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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