Air Canada is updating its guidance for 2023. The revised guidance for adjusted EBITDA* reflects expected earnings resulting from an improvement in traffic and yield from a stronger-than-anticipated demand environment and lower-than expected fuel price. The revised guidance for adjusted CASM* reflects adjustments to various expense items including those resulting from the higher-than-expected traffic. Air Canada’s 2023 capacity guidance remains substantially unchanged.

Air Canada is also modifying the baseline comparison for its 2023 adjusted CASM guidance, comparing it to a 2022 instead of a 2019 baseline.  Given the new cost environment, prior comparisons to the 2019 baseline are no longer as meaningful, and comparisons to 2022 are more appropriate.

Air Canada is providing the following updates to its 2023 guidance.

Metric	Full Year 2023 Guidance
	Prior Guidance  (Provided on February 17, 2023)	Updated Guidance (Provided on May 4, 2023)
ASM capacity	About 24 per cent increase versus 2022 (~90 per cent of 2019 levels)	About 23 per cent increase versus 2022 (~90 per cent of 2019 levels)
Adjusted CASM*	About 13 to 15 per cent above 2019 levels	About 0.5 to 2.5 per cent below 2022 levels
Adjusted EBITDA*	About $2.5 – $3.0 billion	About $3.5 – $4.0 billion

Air Canada is not updating its 2024 targets at this time and will continue evaluating them as it progresses towards its plans and executes on its strategic priorities. 

*Adjusted CASM and adjusted EBITDA referred to in this news release, are non-GAAP financial measures. Such measures are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results. Refer to the “Non-GAAP Financial Measures” section of this news release for descriptions of these measures, and for a reconciliation of Air Canada non-GAAP measures used in this news release to the most comparable GAAP financial measure.

Major Assumptions

Assumptions were made by Air Canada in preparing its updated guidance. As part of its assumptions, Air Canada assumes moderate Canadian GDP growth for 2023. Air Canada also assumes that the Canadian dollar will trade, on average, at C$1.34 per U.S. dollar for the full year 2023 and that the price of jet fuel will average C$1.09 per litre for the full year 2023.

Non-GAAP Financial Measures 

Below is a description of certain non-GAAP financial measures and ratios used by Air Canada to provide readers with additional information on its financial and operating performance. Such measures are not recognized measures for financial statement presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities and should not be considered a substitute for or superior to GAAP results.

Adjusted CASM

Air Canada uses adjusted CASM to assess the operating and cost performance of its ongoing airline business without the effects of aircraft fuel expense, the cost of ground packages at Air Canada Vacations, impairment of assets, and freighter costs as these items may distort the analysis of certain business trends and render comparative analysis across periods less meaningful and generally allows for a more meaningful analysis of Air Canada’s operating expense performance and a more meaningful comparison to that of other airlines.

In calculating adjusted CASM, aircraft fuel expense is excluded from operating expense results as it fluctuates widely depending on many factors, including international market conditions, geopolitical events, jet fuel refining costs and Canada/U.S. currency exchange rates. Air Canada also incurs expenses related to ground packages at Air Canada Vacations which some airlines, without comparable tour operator businesses, may not incur. In addition, these costs do not generate ASMs and therefore excluding these costs from operating expense results provides for a more meaningful comparison across periods when such costs may vary.

Air Canada also incurs expenses related to the operation of freighter aircraft which some airlines, without comparable cargo businesses, may not incur. Air Canada had six dedicated freighter aircraft in its fleet as at March 31, 2023. Prior to 2021, Air Canada did not incur any costs related to the operation of dedicated freighter aircraft. These costs do not generate ASMs and therefore excluding these costs from operating expense results provides for a more meaningful comparison of the passenger airline business across periods.

Adjusted CASM is reconciled to GAAP operating expense as follows: 

(Canadian dollars in millions, except where indicated)	Full Year
	2022
Operating expense – GAAP	$	16,743
Adjusted for:
Aircraft fuel		(5,276)
Ground package costs		(474)
Impairment of assets		(4)
Freighter costs (excluding fuel)		(86)
Operating expense, adjusted for the above-noted items	$	10,903
ASMs (millions)		82,558
Adjusted CASM (cents)	¢	13.21

EBITDA and Adjusted EBITDA

EBITDA (earnings before interest, taxes, depreciation and amortization) is commonly used in the airline industry and is used by Air Canada as a means to view operating results before interest, taxes, depreciation and amortization as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft and other assets. In calculating adjusted EBITDA, Air Canada excludes impairment of assets as this may distort the analysis of certain business trends and render comparative analysis across periods or to other airlines less meaningful.

EBITDA and adjusted EBITDA are reconciled to GAAP operating income (loss) as follows:

(Canadian dollars in millions, except where indicated)	Full Year
	2022
Operating loss – GAAP	$	(187)
Add back:
Depreciation and amortization		1,640
EBITDA	$	1,453
Impairment of assets		4
Adjusted EBITDA	$	1,457

Top Copyright Photo: Air Canada Boeing 737-8 MAX 8 C-GMIW (msn 61246) LAX (Michael B. Ing). Image: 960466.

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