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Air Canada Shares Fall on Disappointing Guidance for 2024

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Air Canada’s shares took a hit on Friday morning as the company released its guidance for 2024, revealing lower-than-expected capacity growth and higher-than-anticipated costs.

Capacity Growth and Costs

The Canadian airline plans to increase its available seat-miles capacity by approximately 10% compared to the previous year. However, for the full year, the expected capacity growth is projected to be in the range of 6% to 8% higher than in 2023.

On the cost front, Air Canada provided a wide range, forecasting an adjusted cost per available seat mile increase of 2.5% to 4.5%.

Earnings Outlook

The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2024 have been set within the range of C$3.7 billion to C$4.2 billion. In comparison, Air Canada reported adjusted EBITDA of C$3.98 billion for the full year of 2023, exceeding its initial guidance.

Analyst’s Perspective

Scotiabank analyst Konark Gupta stated that Air Canada’s 2024 guidance was mixed. While the raised EBITDA target exceeded expectations, the capacity growth fell short, and adjusted cost per available seat mile was higher than anticipated. The capex outlook remained largely unchanged. Gupta expects investors to pay close attention to the cost per available seat mile guidance since it was not expected to be as high as that of U.S. peers.

Fourth Quarter Performance

In its final quarter of the year, Air Canada reported operating revenues of C$5.18 billion, a year-on-year increase of 11%. This exceeded analyst expectations of a rise to C$5.13 billion. The net income for the quarter stood at C$184 million, up from C$168 million in the same period a year ago.

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