Goodmorning,ladiesandgentlemen,andwelcometotheAirCanadaFirstQuarter2022EarningsConferenceCall.
IwouldnowliketoturnthemeetingovertoMs.ValerieDurand.Pleasegoahead,MadamDurand.
ThewinterandthestartofspringcanbeverychallenginginNorthAmerica,especiallyCanada.Apartfromtheweatherdisruptionsthatcanaffectallaspectsoftheairtransportsystem,itusuallycomeswithhigh-trafficflows,particularlywiththespringbreakpeak.Thestrongandimprovingcollaborationbetweenourpeopleandourecosystempartnershasbeenkeytoourservicedeliveryduringthisperiodandsetsourexpectationforcontinuedstrongperformancethroughthesummer.
Inthequarter,passengerrevenuestotaledCAD4.1billion,whichismorethandoublethatofayear-agoandarecordforourfirst-quarter.WerecordedadjustedEBITDAofCAD411million,thatisupCAD554millionfromthesame-periodlastyear.AndouradjustedEBITDAmarginwas8.4%,oneofthestrongestamongNorthAmericannetworkcarriers.Alongwiththis,weremaindiligentoncostswithadjustedCASMdownabout7%year-over-year.Costcontrolisandwillremainatoppriorityforus.
WeendedthequarterwithtotalliquidityofoverCAD10.5billion.Thiscertainlygivesustheabilitytoconstantlyexecuteourbusinessplanstotakeourcompanyforwardandtocontinuetogrow.Allcomponentsofourcompanycontributedduringthequarter.AirCanadaVacationsproducedremarkableresults.AndAirCanadaCargocontinuedtoexpanditsnetworkandthefleet.
BeforeIgivethecallovertoMarkGalardo,firstIwanttowelcomeJohnDiBerttotheteam.Ibelievemanyofyouknowhimandallofyouwillitshouldhavetheopportunitytomeethimoverthenextseveralweeks.AlsoIwanttowelcomeMarkGalardoandMarkNasrtotheirfirstanalystcalls.BothbecameExecutiveVicePresidentacoupleofweeksago,leadingallcommercialanddigitalareas.Theyareexcellentleadersandwillbecriticaltobothourshort-termandlong-termfuture.AndIwillsavemycommentsaboutAmosthroughtheendofthecall.Mark,overtoyou.
Thankyou,Mike[ForeignSpeech]Goodmorning,everyone.[ForeignSpeech]Miketouchedonourrecordoperatingrevenues.Passengerrevenuesmorethandoubledforthefirstquarterof2022withabouthalftheincreasecomingfrominternationalandsunmarkets.Thedomesticmarketisperformingasexpectedandtransatlanticdemandremainsverystrong.Wearemaximizingonthedepthandreachofourdiversifiednetworkthroughourhubsandextensiveconnectivitytheyofferglobally.
Asidefromstrongresultsfromtransatlanticandsunmarkets,flightstoAustraliaandJapanperformedverywellwiththelatterinparticularbackto2019levels.SeasonalrouteslikeVancouver-Bangkokclearlydemonstratethatournetworkdiversificationstrategyisworking.Thisalsocounterbalancestraditionalseasonalpatterns.Ouraveragefareshaveincreasedaboveeconomicindicators,signalingthatdemandisnotonlystrong,butthatcustomerdecisionsaroundtravelhaveevolved.Ourpremiumcabinstrengthcontinues.Toputthisinperspective,theyear-over-yeargrowthinrevenuesfrompremiumcabinsrepresented30%ofthetotalincreaseinpassengerrevenuesfromQ12022,anditrepresented49%ofthepassengerrevenuegrowthversusQ12019.
AirCanadaVacationsalsoproducedremarkableresultsthisquarter,evensurpassingthoseinthefirstquarterof2019,demonstratingthestrongvaluepropositionofitsproduct,andelevatedbyateamthatclearlyrosetothechallenge.YouwillrecallthatinJanuary2022,inresponsetotheemergenceandimpactoftheOmicronvariant,AirCanadasuspendedflightstocertainCaribbeandestinationsfromJanuarytoApril2022.OurcustomerswereeagertoreturntothesepreviouslyunavailablesundestinationsandtocapturethisdemandwehavesuccessfullypositionedAirCanadaVacationsasaleadingCanadianvacationbrand.Lookingaheadtotherestoftheyear,wecontinuetoseesolidadvancedbookingsinallmarkets.Thesystembookloadfactoristrendingaheadof2019andaswelookintosummer,ournewroutestoCopenhagen,Toulouse,BrusselsandAmsterdamareperformingtooraboveexpectations.
Wecontinuetodeepenourrelationshipswithourpartnersandexpectsixthfreedomtraffictocontinuetocontributefavorablyandweareseeingasignificantimprovementinyieldstemmingfromthesepartnerships.ThesepartnershipsalsoallowustofurtherbalanceourseasonalityasAmericanandCanadiantravelprofilearehighlycomplementary.Thiswillallowustomaximizeoursixthfreedompotential.Peoplewanttotravel,seasonalityandcustomersegmentsarechangingpostpandemic.
Finally,wecontinuetogrowanddeployourcargofleet.ThishasopenedupadditionalopportunitiesinBaselandotherEuropeancitieslately.Ourcargostrategyiscoretoourdiversificationfocusasitcontinuestocreatevalue,carryingcargofromglobalfreightlanesontoourwiderpassengernetworkinthedomesticNorthAmericaandotherinternationalmarkets.Thisnewanddiversifiedrevenuestreamalsocountersomeoftheseasonalityofthepassengerbusinessandisakeycomponentofourfuturecommercialstrategy.
IwillnowpassitovertoAmos[ForeignSpeech]
Nowturningtoourresults.Totaloperatingexpensesincreased57%fromthefirstquarterof2022,largelyduetoincreasedpassengerrevenue,trafficandcapacity.MoredetailsoncertainlineitemsareoutlinedinthefirstquarterMD&A,whichwaspublishedthismorning.OurfirstquarteradjustedEBITDAofCAD411millionwasbetterthanexpectationsonacontinuingstrongrevenueenvironmentasexplainedbyMike.Fuelcostswerealsolower-than-expectedinthefirstquartercominginatCAD1.285perliter,butstillhigherthanQ1of2022by30%.Thatsaid,asalways,wecontinuetomaintainastrongfocusoncostdiscipline.AdjustedCASMwasabout7%lowerthanayearago.ThefavorableimpactofhighercapacityandresultingefficiencygainwaspartiallyoffsetbyafavorablemaintenancecostadjustmentrecordedinQ1of2022.Thisadjustmentrepresented6percentagepointsonadjustedCASMandifweexcludeitfromQ12022,ouryear-over-yearadjustedCASMvariantswouldhaveimprovedabout13%.Wearedeterminedtostayontrackwithourobjectives,andwearemanagingourbusinessforthelong-term.
Astoourliquidityanddebt,ourCAD10.5billionintotalliquidityconsistedofCAD9.5billiononthebalancesheetandCAD1billionavailableunderundrawncreditfacilities.ItincreasedgeneratedfreecashflowofCAD987millioninthequarter,CAD896millionmorethanayearago.Weremaincommittedininvestinginourfutureforsustainedprofitability,includingbyfurtherdeleveragingourbalancesheet.NetdebtattheendofthequarterdecreasedaboutCAD1billionfromtheendof2022,duetotheincreaseinliquidityanddebtreduction.TheleverageratioatMarch31,2023,was3.2timesora1.9turnimprovementcomparedtoDecember31,2022,whichgetsusclosertoourgoal.
Nowforawordourfleetandotherexpenditures.Asplannedduringthequarter,webroughtbackaBoeing777-300,addedinterimliftwithinAirbusA330andweaddedasixthBoeing767freightertothefleet.Weplantoaddonemorefreightertothefleetthisyear,oneBoeing787-9DreamlinerwasdeliveredinAprilandyouexpectonemorethisyear.Wewelcomeour33rdAirbusA220intothefleet,deliveriesfortheremaining27aircraftonfirmorderareplannedbetween2024and2026.TheAirbusA321XLRdeliveriesarenowscheduledtobeginin2025,withthefinalaircraftscheduledtoarrivein2028.
Wealsocontinuetoinvestintechnologytoimprovethecustomerexperienceandoptimizeourprocesses.InApril,weannouncedasignificantchangetohowwedistributeourcontentandworkwithtravelagencies.Atitscenter,thenewdistributioncapability,orNDC,willofferagenciesmoreoptionstoconnectwithAirCanadawithadditionalcontenttosellandwillenableadvancesinourrevenuemanagementroadmapsuchascontinuouspricing.Thisprogramandournewcommercialarrangementswithindustryprovidersalsocreatecosttransformationopportunities.Wearebuildingforourfuturesuccessandwitheveryinvestmentbeingmade,whichwillthenfostersustainedbenefits.SoourcommittedandplannedcapitalcommitmentsnowcurrentlysitataroundCAD1.6billionfortheremainderof2023andCAD1.9billionfor2024.
Thankyou.Backtoyou,Mike.
Inclosing,IwanttoacknowledgetheincrediblecontributionsofAmosoverthepast13years.Hehasbeenacriticalseniorleaderinvolvedinvirtuallyeverykeydecision.Hewasinstrumentalinbringinghomesignificantstrategicinitiatives,suchastheacquisitionofAeroplanandthesubsequentcreditcardnegotiationswithourpartnerbanks.HehascreatedsomuchvalueforAirCanada,justnotdealingwiththemostcomplexissueswithcreativityandaworkethicsecondtonone,butalsorepresentingAirCanadawithabsolutecareandclass.Hebuiltanincredibleteam,leadingwithempathyandmentoringmanymore,leavingAirCanadawithasolidfoundation.Andonapersonalnote,hehasbeenastrongpartnerformeandagreatfriend.Weallwishhimthevery,verybest.
Thankyou,Mike,andthankyouallforjoiningusthismorning.[ForeignSpeech]Wearenowreadyforyourquestions.Keepinmind,youmayalwaysreachouttoourInvestorRelationsteamshouldyourequirefurtherdetails.Overtoyou,Mos[Phonetic]
Thankyou.Thankyou.Wewillnowtakequestionsfromthetelephonelines.[OperatorInstructions]OurfirstquestionisfromAndrewDidorafromBankofAmerica.Pleasegoahead.
Thankyou.OurfollowingquestionisfromKevinChiangfromCIBC.Pleasegoahead.
Thanks,Kevin.
Thankyou.OurfollowingquestionisfromJamieBakerfromJ.P.Morgan.Pleasegoahead.
Hey,goodmorning.ThisisJames[Phonetic]onforJamie,Mark.Justwanttotalkabouttheratingagencysensitivities,ifyoucanreminduswhatthosearegiventhepositiveoutlookchangesyoureceivedoverthequarterAndifyoucouldjustremindusoftheinternalleveragetargets,ifyouthinkendingat3.2thisquarterissufficienttoreceivethoseupgrades
Gotit.Appreciatethequestions.Thanks.
Thankyou.
Thankyou.AfollowingquestionisfromFadiChamounfromBMO.Pleasegoahead.
Thankyou.OurfollowingquestionisfromChrisMurrayfromATBCapitalMarkets.Pleasegoahead.
Thankyouverymuch,Chris.Thankyou.OurfollowingquestionisfromCameronDoerksenfromNationalBankFinancial.Pleasegoahead.
Thankyou.OurfollowingquestionisfromWalterSpracklinfromRBCCapitalMarkets.Pleasegoahead.
Thankyou,Walter.
Thankyou.OurfollowingquestionisfromKonarkGuptafromScotiabank.Pleasegoahead.
Thankyou.OurfollowingquestionisfromSaviSythfromRaymondJames.Pleasegoahead.
Understoodandappreciatethat.AndmaybeifIcan,Amos,toturntojustonthecostlineintotalkingaboutit.Iappreciatethekindofthenewercostthattheindustryisworkingwithandalsomaybecostrelatedtogoodguys,whichishigherrevenue.Butasyoukindoflookinto2024,couldyoutalkaboutlikesomeofyourmajoritemsandlineitemsandjustthetrendsasyoukindofgetthroughthisyearandintonextyeariftherearekindofprettybigincreasescontinuingorifwecouldseesomeimprovementinanyofthekindofmajorlineitems
Thankyou.[OperatorInstructions]OurfollowingquestionisfromStephenTrentfromCiti.Pleasegoahead.Oh,Mr.Trenthasjustdisconnectedfromthequeue.Sowehavenofurtherquestionsregisteredatthistime.IwouldnowliketoturnthemeetingbackovertoMs.Durand.
[ForeignSpeech]Thankyou,andthankyouonceagainforjoiningusthismorning.Oncemore,weinviteyoutocontactusatInvestorRelationsifyouhaveanyfurtherquestions.Thankyouverymuch,andhaveaniceday.[ForeignSpeech]
[OperatorClosingRemarks]
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