Source: Thiago Trevisan.
  • Air Canada is tempering its outstanding 2023 results with potentially higher operating costs in 2024, pending a new labour agreement with its more than 5,000 pilots
  • Mediation will continue until June 1, with pilots keen on closing the 50-300 per cent pay gap with U.S. airlines
  • Air Canada is Canada’s largest airline, providing service to more than 180 airports in Canada, the United States and internationally across six continents
  • Air Canada stock (TSX:AC) is down by 11.42 per cent year-over-year, and has fallen by 45.68 per cent since 2019

Air Canada (TSX:AC) is tempering its outstanding 2023 results with potentially higher operating costs in 2024, pending a new labour agreement with its more than 5,000 pilots.

The Air Line Pilots Association (ALPA), which represents Air Canada’s pilots, will participate in a mediation process with Air Canada until June 1, with the union previously stating its intention to align pay with U.S. airlines, whose pilots earn 50-300 per cent more than Canadian pilots, according to the ALPA’s statement on Air Canada’s 2023 financial results. Air Canada’s pilots have been in negotiations for more than seven months to refresh a nearly decade-old contract that expired on Sept. 29. WestJet, Canada’s second-largest carrier, set a precedent in May by signing a contract granting its pilots a 24 per cent raise over four years.

Air Canada’s Q4 and full year 2023 earnings report – which saw the airline earn C$3.982 billion in adjusted pretax profit, more than twice the 2022 figure, as well as C$2.756 billion in free cash flow – mentions that its adjusted cost per available seat mile could rise from 2.5 per cent to 4.5 per cent in 2024. Chief financial officer John Di Bert echoed this sentiment on a conference call with analysts, commenting on how the airline is facing persistently high costs because of “lagging inflation,” new airport fees and proposed regulation about customer disruptions, on top of negotiations with its pilots.

With travel demand surpassing 2019 levels, The Bank of Canada projecting that inflation will return to normal by 2025, and the company’s demonstrated focus on reducing debt, with its net debt to adjusted EBITDA ratio standing at 1.1 as of Dec. 31, down from 5.1 year-over-year, Air Canada is positioned to keep an increasing amount of free cash flow on hand to improve services, expand routes and court a stock re-rating.

Air Canada is Canada’s largest airline, providing service to more than 180 airports in Canada, the United States and internationally across six continents.

Air Canada stock (TSX:AC) last traded at C$18 per share. The stock is down by 11.42 per cent year-over-year and has fallen by 45.68 per cent since 2019.

Join the discussion: Find out what everybody’s saying about this airline stock on the Air Canada Bullboard, and check out the rest of Stockhouse’s stock forums and message boards.

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