Air Canada (AC.TO) shares fell on Wednesday as the airline’s CEO told investors he was unhappy with the stock’s low price.
The Montreal-based airline reported its second-quarter financial results on Wednesday that were largely in line with the lower forecast it issued last month. Canada’s largest airline posted a net profit of $410 million, compared with $838 million a year earlier, citing increased competition on its lucrative international routes and higher fuel costs.
Air Canada shares fell 1.39 percent to $14.93 at 12:17 p.m. ET on Wednesday, after earlier falling as much as 2.5 percent. Over the past 12 months, the stock has lost about 34 percent and about 19 percent since the beginning of the year.
“We are disappointed with the performance of our share price year-to-date, particularly after our record year in 2023 and after we have fully rehabilitated the balance sheet,” Michael Rousseau told analysts in a conference call following the results release. “We also know that most local airline stocks are facing similar challenges.”
Rousseau says Air Canada’s recent results will be compared to a unique year in 2023, marked by a “rapid increase in demand following the pandemic.”
Still, second-quarter revenue rose to $5.52 billion from $5.43 billion a year earlier as the airline’s total operating capacity increased 6.5 percent. However, passenger revenue per available seat mile, a key industry metric, fell 4.4 percent year over year.
“Systemwide, we expect the decline in revenue and passenger revenue per available seat mile to continue through the third quarter of 2024,” Rousseau said, adding that airport fees in Canada will continue to burden the company “for several years to come.”
“Some have criticized travel costs in Canada,” he added. “To do so selectively without … comparing other jurisdictions is not only completely misleading and simplistic, but frankly troubling.”
Despite recent challenges, Air Canada plans to increase available seat mile capacity by four to 4.5 percent in the third quarter compared to the same quarter in 2023.
Last month, the company lowered its profit forecast due to expectations of lower than expected capacity utilization and stronger international competition.
When asked whether the current financial pressures on Canadian households pose a risk, Mark Galardo, vice president of revenue and network planning, said there is “no real slowdown” among Canadian consumers.
Given the recent decline in the share price, analysts also wondered whether Air Canada would use its strong balance sheet to make opportunistic purchases of its own shares.
“We’re going to continue to make sure we execute our capital allocation strategy to both grow and reward shareholders,” Rousseau said. “So the answer is we have that on the radar, on the priority list for high returns.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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