Air Canada raises 2024 core profit forecast on resilient international demand

By Shivansh Tiwary and Allison Lampert

(Reuters) -Air Canada on Friday lifted the forecast for its 2024 core profit, helped by sustained demand for international travel, but warned of higher labor costs.

Canada’s largest carrier reported a wider-than-expected adjusted per-share quarterly loss of C$0.12, compared with analysts’ expectations of C$0.04, as labor costs rise.

North American carriers with major international operations are benefiting from strong demand, as consumers choose to spend on travel over goods, but face cost pressures as pilots and other workers make gains in bargaining.

Airlines were able to cash in on the strong holiday travel period, which saw an influx of travelers. About 2.6 million customers took Air Canada flights between Dec. 18 and Jan. 6, about 10% more than in the same period in 2022.

Montreal-based Air Canada says international travel accounted for about 65% of the increase in total passenger revenue.

“Our growth on the trans-Pacific is really going to be the main driver of international growth,” Mark Galardo, a vice president specializing in network planning, told analysts.

“We will be looking at international growth that exceeds 10% versus where we were last year.”

The airline expects 2024 core profit to be in the range of C$3.7 billion ($2.75 billion) to C$4.2 billion ($3.12 billion), compared with a target of C$3.5 billion to C$4.0 billion it provided in February last year.

Analysts on average were expecting adjusted EBITDA of C$3.76 billion, according to LSEG data.

The carrier is expecting adjusted CASM (cost per available seat mile) to rise 2.5% to 4.5% compared with 2023, which assumes a labor deal with pilots.

The union representing around 5,300 Air Canada pilots wants to narrow a wage gap with higher-paid aviators at U.S. legacy carriers.

The Canadian carrier’s operating revenue rose 11% to C$5.18 billion in the fourth quarter, beating Street expectations of C$5.12 billion.

($1 = 1.3477 Canadian dollars)

(Reporting by Shivansh Tiwary in Bengaluru and Allison Lampert in Montreal; Editing by Maju Samuel, Shilpi Majumdar and Jonathan Oatis)