Air Canada reports second-quarter earnings down in ’challenging environment’

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MONTREAL — Air Canada says second-quarter earnings were down from last year in what it characterized as a “challenging environment.”

Challenges include an 11 per cent drop in revenue in the airline’s U.S. transborder routes that it attributed to geopolitical tensions and a lower Canadian dollar.

The airline however saw increases in revenue from other areas, including its Atlantic and Latin American routes, as it redirected capacity, said chief executive Michael Rousseau in a statement.

“We have strategically redirected capacity to high-demand markets and captured demand for premium services, leveraging the breadth and strength of our global network.”

Overall, the airline reported a net income of $186 million in the second quarter, down from $410 million in the same quarter last year.

Air Canada says that on an adjusted basis, it had a net income of $207 million in the quarter compared with $369 million in the same quarter last year.

Adjusted earnings worked out to 60 cents per diluted share in the quarter, compared to 98 cents per share last year.

Analysts on average had expected an adjusted profit of 72 cents per diluted share, according to LSEG Data & Analytics.

Passenger revenues in the quarter amounted to $5.03 billion, up one per cent from last year on a 2.5 per cent capacity growth.

Revenue from its U.S. transborder segment was $961 million, down from $1.08 billion last year, while its Atlantic routes saw $1.64 billion in revenue, up from $1.56 billion last year.

For the first six months of the year, revenue from U.S. flights were down 7.9 per cent and its Pacific routes were down 2.8 per cent, contributing to an overall drop of 0.8 per cent in passenger revenue compared with last year.

Despite the challenges, the airline reaffirmed its financial guidance for the year that it issued in May.

Results were slightly below expectations on higher-than-expected costs but overall fairly neutral, said RBC analyst James McGarragle in a note.

“We are taking a neutral view on the results, as the broader narrative of demand recovery and operational realignment remains intact despite the modest cost-related headwinds in the quarter.”