Air Canada says improving operations is ‘highest priority’ as it posts $386 million loss

Air Canada travelers wait in the check-in area as baggage handlers at Pierre Elliott Trudeau airport walked off the job, causing cancellations and delays, in Montreal March 23, 2012. REUTERS/Olivier Jean (CANADA - Tags : COMPANY EMPLOYMENT CIVIL UNREST TRANSPORTATION)

Air Canada flew more than 9.1 million passengers in the second quarter of 2022, almost 8 million more than during the same period last year. (Reuters)

Air Canada saw travel demand surge in its most recent quarter, but the airline still posted a $386 million net loss as it continues to deal with “operational instability” in the post-pandemic surge.

While the Montreal-based airline says it expects operations to improve in the coming weeks, executives offered an apology to customers Tuesday, saying the challenges seen during the second quarter were “not business as usual for us or for no one else involved.”

“We did not achieve an acceptable level of operational stability, and for that we apologize to our affected customers and employees,” Air Canada Chief Operating Officer Craig Landry said on a conference call with analysts.

“However, I can assure everyone that our highest priority across the company has been and continues to be working with all participants in the journey to eliminate any remaining instability and return our operations to pre-pandemic levels of stability.”

The surge in travel demand in the post-pandemic recovery has strained the global air transportation system, causing difficulties for Air Canada and chaos at some of the country’s busiest airports. The acceleration of summer propelled Air Canada and Toronto Pearson Airport to the top of global flight delay charts, with Canada’s largest airline frequently reaching No. 1 in percentage of trips delayed, up to two-thirds of scheduled flights on some days, in June and July.

Difficulties arise when the airline’s total sales for the quarter reached $3.98 billion, almost five times more than the same period last year. Air Canada says it flew nearly as many passengers (70%) in the three-month period ending June 30 as it did in all of 2021. It flew more than 9.1 million customers in the quarter, nearly 8 million more than in the same period in 2021.

“In Canada, we’ve gone from a nearly two-year shutdown of air travel to near 80 percent capacity levels from 2019,” CEO Michael Rousseau said on the conference call.

“We prepared well in advance of 2022 for an increase in travel demand… but despite all the planning, the increase in traffic has created difficulties for all participants in the air transportation system.”

Air Canada entered the peak summer travel period at about 90 per cent of its pre-pandemic staffing levels, but Landry pointed to system-wide challenges that “have begun to show various signs of unprecedented instability.”

“These effects were primarily due to resource challenges and could be seen in airport security, Canadian and US border customs processing, air traffic control, maintenance providers, equipment, supply chain, aircraft catering and fueling partners, just to name a few.” he said, adding that a series of mechanical failures in the airport’s baggage-handling systems at key hubs also contributed to the ongoing problems.

“This type of instability in the delivery chain has a direct impact on our operations. It creates flight delays, flight cancellations and a higher incidence of missed connections and mishandled bags.”

The airline cut more than 15 percent of its scheduled flights in July and August to improve operational stability. So far, Rousseau says operating metrics are improving.

“Baggage is getting better, timeliness is getting better, cancellations are going down and that’s a collective effort of everyone working together … to ensure we can provide a consistent level of service to our customers,” he said.

“We are encouraged by the progress made in recent weeks and look forward to continued improvement in the coming weeks.”

RBC Capital Markets analyst Walter Spracklin said in a note to clients on Tuesday that the results showed the road to recovery from the COVID-19 pandemic will be “up and down” but “pointing in the right direction.” .

“The company’s near-complete shutdown during the pandemic and the speed of the subsequent restart have strained the entire air travel infrastructure, not just Air Canada,” Spracklin wrote.

“While the resulting disruption is not surprising, we were encouraged by management’s comment on the call, which implied the worst was over.”

Air Canada reported a second-quarter loss of $386 million, or $1.60 per diluted share, compared to a net loss of $1.165 billion last year, or $3.31 per diluted share. Still, the loss was below expectations. Analysts had expected a loss of 83 cents per diluted share, according to financial data firm Refinitiv.

Shares of the airline were up about 1 percent as of 12:15 pm ET, trading at $17.55 a share.

With archives from The Canadian Press

Alicja Siekierska is a Senior Reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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