Air Canada revised its core profit forecast for the full year downward, citing increased competition on international routes and market oversaturation that have eroded its pricing power and prompted a nearly 4% drop in its shares during morning trading.
The intense competition among airlines to capitalize on the summer travel surge has led to significant ticket discounts to achieve full flights. Air Canada, the nation’s largest airline, anticipates adjusted EBITDA for 2024 to fall between C$3.1 billion ($2.26 billion) and C$3.4 billion, a decrease from the previously projected range of C$3.7 billion to C$4.2 billion.
The adjustment reflects a challenging environment marked by lower yields, disappointing load factors for the latter half of the year, and stiff competition in international markets.
Citi analyst Stephen Trent noted, “While Air Canada has effectively managed its seat mile costs, the demand environment appears weaker than initially expected.”
According to preliminary data, the airline’s operating revenue for the second quarter was C$5.5 billion, a modest 1.7% increase from the previous year but below the C$5.65 billion analysts had forecasted, based on LSEG data.
Furthermore, Air Canada expects its operating income for the second quarter to reach C$466 million, significantly lower than the C$802 million reported in the same period last year.
