Mr. Michael Rousseau reports

AIR CANADA REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS

Air Canada has released its third quarter 2023 financial results.

"Air Canada performed strongly in the third quarter, generating solid operating revenues of more than $6.3-billion, a 19-per-cent increase over the same period last year. Our focus on growing our international network, building scale at our hubs and leveraging our solid partnerships is delivering strong results. Our operating income reached $1.4-billion, more than double from a year ago, and adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] grew by $773-million to $1.83-billion, representing an adjusted EBITDA margin of nearly 29 per cent. I thank our employees and management team for their hard work in safely transporting 12.6 million customers during the busy and demanding summer season. We managed costs prudently, with operating expenses rising 5 per cent, on a 10-per-cent increase in capacity. We have continued to pay down debt in the quarter, lowering our leverage ratio to 1.4 from 5.1 at the end of last year, while also maintaining a healthy level of liquidity, which stood at nearly $10-billion at the quarter's end," said Michael Rousseau, president and chief executive officer at Air Canada.

"Viewed sequentially, Air Canada's progressive performance to date proves the success of its strategy to grow back the airline and improve operational stability, while mitigating risks. This requires navigating geopolitical uncertainty, inflation and the volatile fuel price environment, meeting increased competition and dealing with supply chain, and the evolving regulatory environment. Yet our demonstrated adaptability, combined with a stable demand environment, give us every confidence for the rest of the year and into 2024 despite the inevitable headwinds to which our global industry is prone. We will continue to manage our business with diligence. We remain confident with our full-year adjusted EBITDA guidance and at this point in time, expect to land in the higher range of our full-year guidance."

Third quarter 2023 financial results:

• Operating revenues of $6,344-million increased over $1-billion from the third quarter of 2022 driven by higher passenger revenues. Operated capacity increased 10 per cent from the third quarter of 2022, about one percentage point below the projection provided in Air Canada's Aug. 11, 2023, news release.
• Operating expenses of $4,929-million increased $251-million or 5 per cent from the third quarter of 2022. The increase was due primarily to increases in nearly all line items reflecting higher traffic and capacity year-over-year and general inflationary pressures. Lower aircraft fuel expense resulting from 23-per-cent-lower jet fuel prices year-over-year partially offset the increase.
• Operating income of $1,415-million, with an operating margin of 22.3 per cent, improved $771-million from the third quarter of 2022.
• Adjusted EBITDA of $1.83-billion, with an adjusted EBITDA margin of 28.8 per cent, increased $773-million from the third quarter of 2022.
• Net income of $1.25-billion increased $1,758-million from the third quarter of 2022. Diluted earnings per share of $3.08 compared with a diluted loss per share of $1.42 in the third quarter of 2022.
• Adjusted net income of $1,281-million improved $850-million from the third quarter of 2022. Adjusted earnings per diluted share of $3.41 compared with $1.07 in the third quarter of 2022.
• Adjusted CASM (cost per available seat mile) of 12.20 cents increased 5.6 per cent from the third quarter of 2022. The unit cost was impacted by a 17-per-cent increase in salaries, wages and benefits expenses -- on higher staffing levels -- and by higher passenger service costs due to higher traffic and higher selling costs -- which are correlated to revenues -- and by inflationary pressures on various line items. Third quarter 2023 CASM of 17.57 cents decreased 4 per cent from the third quarter of 2022, driven by lower fuel prices and higher capacity year-over-year, and was partially offset by higher salaries, wages and benefits, higher passenger service costs, and inflationary pressures.
• Net cash flows from operating activities of $408-million increased $118-million from the third quarter of 2022.
• Free cash flow of $135-million increased $178-million from the third quarter of 2022.
• Net debt to adjusted EBITDA ratio was 1.4, as measured at Sept. 30, 2023, an improvement from the ratio of 1.7 at June 30, 2023, and 5.1 at Dec. 31, 2022, driven by an increase in adjusted EBITDA and a $2.1-billion reduction in net debt in the first nine months of 2023.

Outlook

For the fourth quarter of 2023, Air Canada plans to increase its ASM capacity by about 10 per cent from the same quarter in 2022. Air Canada is providing the update herein for the full-year 2023 guidance.

Third quarter 2023 conference call

Air Canada will host its quarterly analysts call today, Monday, Oct. 30, 2023, at 8 a.m. ET. Mr. Rousseau, Air Canada president and chief executive officer, John Di Bert, executive vice-president and chief financial officer, and Mark Galardo, executive vice-president, revenue and network planning, will present the results and be available for analysts' questions. Immediately following the question-and-answer session, Mr. Di Bert and Pierre Houle, vice-president and treasurer, will be available to answer questions from term loan B lenders and holders of Air Canada bonds.

Media and the public may access this call on a listen-only basis. Details are as follows:

By telephone: 1-800-715-9871 (toll-free), passcode 4751482

Please allow 10 minutes to be connected to the conference call.

About Air Canada

Air Canada is Canada's largest airline, the country's flag carrier and a founding member of Star Alliance, the world's most comprehensive air transportation network. Air Canada provides scheduled service directly to more than 180 airports in Canada, the United States and internationally on six continents. It holds a four-star ranking from Skytrax. Air Canada's Aeroplan program is Canada's premier travel loyalty program, where members can earn or redeem points on the world's largest airline partner network of 45 airlines, plus through an extensive range of merchandise, hotel and car rental rewards. Its freight division, Air Canada Cargo, provides air freight lift and connectivity to hundreds of destinations across six continents using Air Canada's passenger and freighter aircraft. Air Canada aims to achieve an ambitious net-zero-emissions goal from all global operations by 2050. Air Canada shares are publicly traded on the Toronto Stock Exchange in Canada and the OTCQX in the U.S.

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