Earnings excluding one-time items jumped to 85 cents a share from 47 cents, matching the average estimate of analysts in a Bloomberg survey, Air Canada said Wednesday in a statement. Revenue was $3.41 billion compared with a $3.45 billion estimate.
Chief executive officer Calin Rovinescu is packing more seats on long-haul jets, expanding the low-cost Rouge unit and ordering fuel-efficient models as he seeks to boost savings to 21 per cent on each available seat mile by the end of 2018 from a previous target of 15 per cent. Those efforts have been buoyed by kerosene prices that are about half what they were a year earlier.
Canada’s largest carrier also predicted record third-quarter results, with the margin for earnings before interest, tax, depreciation, amortization and aircraft rent expanding more than the 3.5 percentage-point gain of the second quarter.
David Tyerman, an analyst at Canaccord Genuity in Toronto who advises investors to buy the stock, said in a note to clients that “a much improved fuel situation” helped produce results that “are better than we are modeling.
“We continue to expect normalization of profits, but the new decline in fuel prices has pushed the timing of this out, likely to 2016.”
Air Canada spent $648 million on aircraft fuel in the latest quarter, 22 per cent less than a year ago, according to a quarterly filing posted on the company’s website.
For all of 2015, Air Canada now expects a drop of 1 per cent to 2 per cent in adjusted costs for each seat flown a mile. That’s less than the 1.5 per cent to 2.5 per cent decline that the company projected May 12 — a change that Air Canada said largely reflects the impact of a weaker Canadian dollar on U.S.- denominated operating expenses.
Canada’s dollar has lost about 15 per cent of its value against its U.S. counterpart in the last year, Bloomberg data show. Airline-industry costs such as fuel and planes are typically denominated in U.S. currency.
Adjusted costs for each seat flown a mile rose 0.7 per cent in the second quarter and will probably shrink 0.5 per cent to 1.5 per cent in the current quarter, Air Canada said.
The shares closed unchanged at $12.90 Tuesday in Toronto. The stock has gained 8.7 per cent this year, versus a 1.5 per cent fall for the benchmark Standard & Poor’s/TSX Composite Index.