Mr. Michael Rousseau reports

AIR CANADA REPORTS FOURTH QUARTER AND FULL YEAR 2023 FINANCIAL RESULTS

Air Canada has released its fourth quarter and full-year 2023 financial results.

"Air Canada produced very strong results for the fourth quarter and full-year 2023, delivering on its key financial goals and strategic priorities. For the full year, we had record operating revenues of $21.8-billion, up 32 per cent from 2022, as demand for air travel remained strong. Annual operating income was $2.3-billion; a $2.5-billion improvement from the previous year. Our adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] was nearly $4-billion; more than twice that of full-year 2022. These results stem from the effective management, hard work and customer-centric approach of everyone at Air Canada. I thank the entire team for their dedication as we safely transported more than 46 million passengers in 2023. The focus on operational improvements was evident as, even with the growth in traffic and ongoing supply chain challenges, our key operational metrics and customer satisfaction improved year over year," said Michael Rousseau, president and chief executive officer of Air Canada.

"We also took important steps during the year to enable ourselves to continue performing consistently as we remain firmly committed to our plan and to enhancing our level of customer service, improving our operational reliability, strategically adding to our key hubs and network, and growing profitably. We strengthened our balance sheet, reduced our debt and, despite the continuing macroeconomic and structural cost pressures on our industry, our unit costs were contained within our adjusted CASM [cost per available seat mile] guidance. Additionally, we will continue to expand Aeroplan, a key driver of customer loyalty that has doubled its membership to eight million members over the last five years.

"Our airline remains adaptable to changing business conditions and is poised to take advantage of opportunities, giving us every confidence for the year ahead. As we look into the future, we aim to grow, deliver on our financial objectives and create long-term value for all stakeholders."

Fourth quarter 2023 financial results

The following is an overview of Air Canada's results of operations and financial position for the fourth quarter of 2023 compared with the fourth quarter of 2022:

• Operating revenues of $5,175-million increased $495-million, or 11 per cent, on an operated capacity growth of over 9 per cent year over year, close to the guidance provided in Air Canada's news release dated Oct. 30, 2023.
• Operating expenses of $5,096-million increased $388-million, or 8 per cent. The increase was due to higher costs in nearly all line items, reflecting higher operated capacity and traffic year over year, including higher wages, salaries and benefits. The increase was partially offset by lower aircraft fuel expense on a jet fuel price decline.
• Operating income of $79-million, with an operating margin of 1.5 per cent, improved $107-million.
• Adjusted EBITDA of $521-million, with an adjusted EBITDA margin of 10.1 per cent, improved $132-million.
• Net income of $184-million and diluted earnings per share of 41 cents compared with a net income of $168-million and diluted earnings per share of 41 cents.
• Adjusted net loss of $44-million and adjusted loss per diluted share of 12 cents compared with an adjusted net loss of $217-million and adjusted loss per diluted share of 61 cents.
• Adjusted CASM of 14.25 cents compared with 13.68 cents, an increase of 4.1 per cent, driven by higher salaries, wages and benefits expenses, higher maintenance costs, and general inflationary pressures on certain line items.
• Net cash flows from operating activities of $985-million increased $338-million.
• Free cash flow of $669-million increased $349-million.

Full-year 2023 financial results

The following is an overview of Air Canada's results of operations and financial position for full-year 2023 compared with full-year 2022:

• Operating revenues of $21,833-million increased $5,277-million, or 32 per cent, on approximately a 20-per-cent growth in operated capacity. The capacity increase was in line with the guidance provided in Air Canada's news release dated Oct. 30, 2023.
• Operating expenses of $19,554-million increased $2,811-million, or 17 per cent. The increase was primarily due to increases in all line items, reflecting higher operated capacity and traffic year over year, including higher salaries, wages and benefits. It also reflects the impact of a favourable maintenance cost adjustment of $159-million that was recorded in the first quarter of 2022.
• Operating income of $2,279-million, with an operating margin of 10.4 per cent, improved $2,466-million.
• Adjusted EBITDA of $3,982-million, with an adjusted EBITDA margin of 18.2 per cent, improved $2,525-million, at the high end of the guidance provided in Air Canada's news release dated Oct. 30, 2023.
• Net income of $2,276-million and diluted earnings per share of $5.96 compared with a net loss of $1.7-billion and diluted loss per share of $4.75.
• Adjusted net income of $1,713-million and adjusted earnings per diluted share of $4.56 compared with an adjusted net loss of $988-million and an adjusted loss per diluted share of $2.76.
• Adjusted CASM of 13.49 cents compared with 13.21 cents in 2022, a 2.2-per-cent increase driven by higher traffic and selling costs correlated to higher revenues, higher labour costs, a favourable maintenance cost adjustment recorded in 2022, and inflationary pressure on certain line items. This was within the guidance range provided in Air Canada's news release dated Oct. 30, 2023.
• Net cash flows from operating activities of $4.32-billion increased $1,952-million.
• Free cash flow of $2,756-million increased $1.96-billion.
• Net debt to adjusted EBITDA ratio was 1.1 at Dec. 31, 2023, an improvement from 5.1 as at Dec. 31, 2022, due to the increase in adjusted EBITDA and a $2.9-billion reduction in net debt.

Outlook

For the first quarter of 2024, Air Canada plans to increase its ASM (available seat mile) capacity by about 10 per cent from the same quarter in 2023.

Air Canada has provided its guidance for full-year 2024, replacing prior 2024 targets.

Major assumptions

Assumptions were made by Air Canada in preparing and making forward-looking statements. As part of its assumptions, Air Canada assumes moderate Canadian GDP (gross domestic product) growth for 2024. Air Canada also assumes that the Canadian dollar will trade, on average, at $1.33 per U.S. dollar for full-year 2024 and that the price of jet fuel will average $1 per litre for full-year 2024.

Fourth quarter and full-year 2023 conference call

Air Canada will host its quarterly analyst call on Friday, Feb. 16, 2024, at 8 a.m. ET. Mr. Rousseau, 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 questions from analysts. Immediately following the analyst 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-in basis. Details are as follows.

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

Conference ID:  6697341

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 partners. 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-emission 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 United States.

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