Air Canada’s stock price tumbled the most in more than a month after the airline slashed its full-year guidance for the second quarter in a row on higher-than-expected jet fuel prices.
The Montreal-based carrier, which is Canada’s largest, said it now anticipates adjusted earnings before interest, tax, depreciation and amortization to land between C$2.4 billion ($1.7 billion) and C$2.7 billion for the year. In August, it expected adjusted Ebitda of as much as C$3.2 billion.
Shares were down 7.9 percent to C$20.14 at 1:40 p.m. Friday in Toronto. The airline suspended guidance in April after the outbreak of war in Iran, before reinstating it at lower levels in August. Thursday’s third-quarter earnings release cut that outlook again, citing a C$906 million year-over-year increase in fuel expenses.
The carrier sees jet fuel costing approximately C$1.72 per liter for the fourth quarter, up from a previous estimate of C$1.29 per liter.
That means airfares could be heading upward, too. ‘At this point in time, certainly we are trying to push further increases in market,’ Mark Galardo, chief commercial officer, told analysts.
Despite the tough cost backdrop, Air Canada said its third-quarter operating revenue of C$7 billion constituted a record.
‘Higher fuel costs are weighing more heavily on the profitability of Air Canada’s competitors, which ultimately will lead to more industry capacity cuts to the benefit of Air Canada,’ National Bank of Canada analyst Cameron Doerksen wrote in a note.
The carrier’s largest rival, WestJet Airlines Ltd., called for a national aviation strategy Thursday ‘to address mounting cost pressures and a growing market imbalance that is weakening Canadian aviation’s ability to absorb fuel-price shocks,’ adding the system is ‘already stretched thin by cumulative charges and regulatory burden to the brink.’
WestJet blamed the Canadian government for rescuing smaller carriers Transat A.T. Inc., Porter Airlines Inc. and Flair Airlines Ltd. in recent months. Publicly traded Transat said in September that it’s taken a total of C$400 million in federal loans due to fuel costs. That’s in addition to debts incurred during the Covid pandemic, which it already struggled to pay off.
‘Self-funding companies are left challenged to compete against fares subsidized by public financing,’ WestJet said in its statement. ‘While well-intentioned, this is now undermining the entire industry’s ability to recover the cost of fuel.’
Air Canada said by email that it ‘remains focused on managing fuel-price volatility.’