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Air Canada (AC.TO) shares jumped 14 per cent on Friday, after the airline beat profit estimates, raised its full-year guidance and announced a share buyback program.
The Montreal-based airline’s stock closed the trading day Friday on the Toronto Stock Exchange at $21.51 per share, a gain of 14 per cent compared to Thursday’s close, just 10 cents short of its intraday high.
Air Canada reported third-quarter results on Friday that saw operating revenue and earnings surpass analyst expectations, even as the threat of a pilot strike loomed. It also hiked its full-year guidance for the year for earnings amid strong international demand and lower fuel costs, with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to be approximately $3.5 billion in 2024, up from a range of $3.1 billion to $3.4 billion.
The airline posted a third-quarter operating revenue of $6.11 billion, down from $6.34 billion last year but above consensus estimates of $6.08 billion. Adjusted net income came in at $969 million, or $2.57 per share, compared to $1.28 billion, or $3.41 per diluted share, last year. Analysts had expected adjusted earnings to come in at $1.62 per share.
TD Cowen analyst Tom Fitzgerald wrote in a research note on Friday that the results were “much better… than we had forecast.”
“The revenue hit from book away around the height of its pilot contract negotiations in September looks to have been much better than we feared,” Fitzgerald wrote, noting that “(the) big news in the report is obviously the long-awaited return of shareholder repurchases.”
Some analysts had lowered earnings estimates for the airline amid concerns that the threat of a pilot strike led to fewer bookings and more cancellations. In the lead up to the strike, Air Canada’s executive vice-president for revenue and network planning Mark Galardo said the airline saw multiple weeks of softer booking volume as some customers postponed or cancelled flights, while others flew with alternative carriers. Total operating revenue was down four per cent compared to last year.
But Air Canada reached a last-minute deal with its pilots in late-September, with the new deal adding $1.9 billion in value for union members and a cumulative pay rate increase of 42 per cent over five years.
With the pilot negotiations now behind it, Air Canada announced a new share buyback program on Friday that will see the company repurchase up to 10 per cent of outstanding shares. Chief executive Michael Rousseau said on a conference call with analysts on Friday that the buyback will allow the airline to “reverse some of the dilutive but necessary measures we took during COVID.”