Category: Uncategorized

Air Canada Reports First Quarter 2022 Financial Results

---

NEWS PROVIDED BYAir Canada 

Apr 26, 2022, 06:00 ET

---

• First quarter operating revenues of $2.573 billion, or about three-and-a-half times first quarter 2021 operating revenues
• First quarter 2022 operating loss of $550 million compared to an operating loss of $1.049 billion in the first quarter of 2021
• Advance ticket sales grew about $1.2 billion in the first quarter of 2022 from year end 2021
• Airbus A321XLR order increased by four to 30 aircraft with IAE to supply related PW1100G-JM engines

MONTREAL, April 26, 2022 /CNW Telbec/ – Air Canada today reported its first quarter 2022 financial results.

“The substantial year-over-year improvement in Air Canada’s first quarter results is clear evidence that a recovery is underway. Our strong improvement is a testament to our employees, and I thank them for their hard work taking care of our customers throughout more than two years of a global pandemic. Now, our employees are demonstrating this same level of determination, commitment and passion in executing on our recovery strategy,” said Michael Rousseau, President and Chief Executive Officer of Air Canada.

“The year began with weakness brought on by the Omicron variant and travel restrictions. However, we quickly rebounded in March with passenger volumes exceeding the strong December levels and passenger ticket sales in March 2022 over 90 per cent of March 2019 levels, a leading indicator to much stronger 2022 second and third quarter results. For the quarter, Air Canada had operating revenues of $2.573 billion, more than triple that of the same quarter in the prior year.  This was accompanied by a strict cost discipline that reduced adjusted CASM* by over six per cent from the fourth quarter of 2021. Quarterly EBITDA*, while a negative $143 million, improved $620 million over last year and we ended the quarter with $10.162 billion in unrestricted liquidity, close to 2021 year-end levels.

“In anticipation of our recovery, Air Canada has kept the course with key long-term projects to increase and diversify revenue and lower costs. One such program is the expansion of Air Canada Cargo, with quarterly revenue up 42 per cent to $398 million from the first quarter of 2021, and now further expanded with the addition of two new Boeing 767-300 freighters to be delivered in 2022.  The renegotiation of key engine maintenance contracts completed in the quarter, will also yield savings over the remaining life of the contracts.  Aeroplan air redemption bookings in the quarter exceeded those of the same quarter in 2019 by 19 per cent.  The relaunched program saw the highest new member acquisitions and redemptions in a quarter, and generated third-party gross billings exceeding first quarter 2019 levels by 21 per cent,” said Mr. Rousseau.

“Air Canada is rapidly adapting for the post-pandemic world. We are doing our part by contributing to the travel of Ukrainians to Canada, with a substantial donation of 100 million Aeroplan points.  We have also advanced our ESG goals in the quarter by announcing an order for 26 fuel-efficient Airbus A321XLR aircraft, which we have now increased to 30 aircraft. As well, we have recently entered into a long-term agreement with International Aero Engines, LLC (Pratt & Whitney) for the selection of the PW1100G-JM engines, spare engines and related maintenance services for these new aircraft.  We are responding to the evolving competitive landscape through our Rise Higher strategy to elevate all aspects of our business, particularly as it relates to the customer experience. Given pent-up travel demand, the demonstrated loyalty of our customers, and the expected further removal of travel-related government restrictions, Air Canada anticipates its recovery will gain momentum through the balance of 2022 and beyond,” said Mr. Rousseau.First Quarter 2022 Financial Results

• In the first quarter of 2022, Air Canada’s operating capacity, measured by Available Seat Miles (ASMs) increased about 3.4 times from the first quarter of 2021. When compared to the first quarter of 2019, ASM capacity represented a decline of 45 per cent, which was generally in line with the capacity expectations projected in Air Canada’s fourth quarter 2021 earnings release dated February 18, 2022.
• First quarter 2022 passenger revenues of $1.917 billion increased nearly five times from the first quarter of 2021.
• First quarter 2022 operating revenues of $2.573 billion increased about three-and-a-half times from the first quarter of 2021.
• First quarter 2022 total operating expenses of $3.123 billion increased $1.345 billion or 76 per cent from the first quarter of 2021.
• First quarter 2022 cost per available seat mile (CASM) of 21.8 cents compared to first quarter 2021 CASM of 42.2 cents.
• First quarter 2022 adjusted cost per available seat mile* (adjusted CASM) of 15.6 cents compared to first quarter 2021 adjusted CASM of 40.4 cents.
• First quarter 2022 EBITDA (excluding special items)* or earnings before interest, taxes, depreciation and amortization of negative $143 million compared to negative EBITDA of $763 million in the first quarter of 2021.
• First quarter 2022 net loss of $974 million or $2.72 per diluted share compared to a net loss of $1.304 billion or $3.90 per diluted share in the first quarter of 2021.
• First quarter 2022 cash from operations was $335 million compared to cash used in operations of $888 million in the first quarter of 2021, an improvement of $1,223 million driven by improved operating results and strong advance ticket sales. Free cash flow of $59 million in the first quarter of 2022 improved by $1,221 million when compared to the same period in 2021.

* EBITDA, EBITDA margin, adjusted CASM and free cash flow (discussed further below) are non-GAAP financial measures or non-GAAP ratios. 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 Air Canada’s non-GAAP financial measures and non-GAAP ratios and for a reconciliation of Air Canada non-GAAP measures to the most comparable GAAP financial measure.First Quarter 2022 Overview

Over the quarter, and until February 28, 2022, all travellers, regardless of vaccination status, were required to provide a negative pre-entry COVID-19 PCR test result taken within 72 hours of departure or a proof of a positive test result received in the previous 11 to 180 days. On February 15, 2022, the Government of Canada announced changes to certain travel restrictions for fully vaccinated travellers.  Refer to section 4 “Overview & First Quarter 2022 Highlights” of Air Canada’s First Quarter 2022 MD&A for additional information on such changes.

On March 17, 2022, the Government of Canada announced additional changes that came into effect on April 1, 2022, allowing for fully vaccinated travellers to no longer be required to provide a pre-entry COVID-19 test result to enter Canada by air, land or water. Foreign nationals who do not meet the requirements to be considered fully vaccinated are not able to enter Canada unless they meet an exemption set out in the Orders made under the Quarantine Act. Unvaccinated or partially vaccinated travellers allowed to enter Canada remain subject to the federal requirement to quarantine and take a COVID-19 PCR test at the time of arrival and on day eight after arrival

Microsoft earnings beat across the board, stock up on outlook

• Microsoft beat expectations on the top and bottom lines.
• Fourth-quarter revenue guidance for each of the company’s three business segments surpassed the expectations of analysts surveyed by StreetAccount.
• The company announced plans in the quarter to buy Activision Blizzard for almost $69 billion.

Stocks making the biggest moves after hours: Alphabet, Robinhood, Meta and more

Alphabet — Shares tumbled more than 6% in extended trading after Google’s parent company reported an earnings miss. The firm reported earnings of $24.62 per share and revenues of $68.01 billion. Refinitiv analysts were expecting earnings of $25.91 and revenues of $68.11 billion.

Robinhood — Shares of the retail brokerage fell more than 5% in extended trading after Robinhood said it is cutting back on staff, according to a blog post from CEO Vlad Tenev on Tuesday. The company cited “duplicate roles and job functions” after it expanded last year.

Microsoft — Shares dipped 0.4% in extended trading after Microsoft reported earnings that exceeded expectations. The tech giant reported earnings of $2.22 per share, compared to $2.19 earnings per share expected by analysts, according to Refinitiv. Revenues came in at $49.36 billion, versus the $49.05 billion expected.

Enphase Energy — Shares jumped more than 6% in extended trading after the solar tech company reported quarterly results. Enphase reported earnings of 79 cents per share, compared to analyst expectations of 67 cents per share, according to Refinitiv.

Meta Platforms — Meta’s stock price dropped more than 4% in extended trading following sharp declines for the Nasdaq Composite and Big Tech names during the trading session. The social media company is expected to report quarterly earnings on Wednesday.

Qualcomm — Shares of the semiconductor stock dipped 1.8% after hours, extending losses from the regular trading session. Qualcomm is expected to report quarterly earnings after the bell on Wednesday.

Visa — Shares jumped 4.8% after the payments company posted an earnings beat on the top and bottom lines. Visa expects travel recovery will continue to boost growth.

• Officials in Poland and Bulgaria say Russia is suspending their countries’ natural gas deliveries starting on Wednesday.
• The suspensions would be the first since Russian President Vladimir Putin said last month that “unfriendly” foreign buyers would have to pay the state-owned Gazprom in rubles instead of other currencies.
• Poland’s energy supplies are secure, Poland’s climate ministry said on Tuesday.

https://b9928b76a78e5b744d8a23ddd1ac1f5c.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Google parent Alphabet Inc on Tuesday reported first-quarter revenue below expectations as YouTube sharply missed Wall Street targets and ad sales were pressured by supply-chain and inflation concerns and the war in Ukraine.

The world’s largest provider of search and video ads has been a big winner of the shift to online commerce over the past two years, but the results suggest it is struggling in the latest economic phase of the pandemic, which is bringing elevated interest rates, higher transport costs and shortages of products from couches to cars to infant formula.

Alphabet shares were down 6.5% in after-hours trading.

“Alphabet has been seen as one of the most insulated companies in the advertising space relative to peers, but sometimes you can still own the best house in the worst neighbourhood,” said David Wagner, portfolio manager at Aptus Capital Advisors.

YouTube advertising sales of $6.9 billion missed Wall Street’s target of $7.5 billion, according to Factset.

Google’s chief business officer, Philipp Schindler, said YouTube direct response ads grew more moderately during the quarter.

Alphabet said first-quarter sales were $68.01 billion, 23% higher than last year but below the average estimate of $68.1 billion among financial analysts tracked by Refinitiv, its first miss since the fourth quarter of 2019 before the pandemic. Alphabet’s total costs also increased 23%.

Analysts said Google’s ad sales were in line with expectations overall, but that YouTube’s advertising growth was less than expected. Cloud sales grew at a slower pace than a quarter ago, and Google’s “other” revenue, which includes app, hardware and subscription sales, were $6.8 billion, below estimates of $7.3 billion.

Last week, Snap Inc warned that inflation, labour shortages and other economic challenges could pressure ad revenue.

Facebook parent Meta Platforms Inc, the second-biggest online advertising platform with an expected 21.4% share of the global market in 2022, reports earnings on Wednesday. Its shares fell 3.3% on Tuesday after Alphabet’s results.

Google is expected to grab 29%, or the leading share, of the $602 billion global online ad market in 2022, at least the 12th straight year it has been on top, according to Insider Intelligence.

Product changes by Google to resolve antitrust concerns and rising competition from companies such as Amazon.com Inc and ByteDance’s TikTok are chipping away at ad sales. Google also cut advertising offerings and other services in Russia following the invasion of Ukraine during the first quarter.

Still, travel and entertainment advertisers are ramping up again, and it is better positioned than rivals to withstand economic shocks because Google’s advertising tools tend to be among the last abandoned by advertisers as they are well known, easy to use and reach more users than alternatives.

Quarterly profit was $16.44 billion, or $24.62 per share, missing expectations of $25.76 per share.

Though Alphabet shares were down over 17% this year entering Tuesday, they have risen nearly 90% over the past two years.

Alphabet bought back over $81 billion in shares over the last two years and on Tuesday said its board had authorized an additional $70 billion in repurchases.

High on the list of risks faced by the company are numerous lawsuits and investigations into whether Google has engaged in anticompetitive conduct through its advertising and other businesses.

The newest scrutiny has been on its pending $5.4 billion acquisition of cybersecurity services provider Mandiant, which the U.S. Department of Justice is reviewing closely. Google has said it still expects to close the deal this year.

Google Cloud, the unit that would contain Mandiant, increased revenue in the first quarter by 44% compared with a year ago to $5.82 billion.

CN Rail profits dip amid supply chain snarls

Canadian National Railway Co. is lowering its earnings forecast for the year after profits sagged in its first quarter.

Citing tough operating conditions and “worldwide economic uncertainty,” the Montreal-based company now predicts adjusted diluted earnings per share growth of between 15 and 20 per cent, versus its target of 20 per cent at the start of the year.

CN is also aiming for an operating ratio – a measure of the railway’s efficiency that divides operating expenses by net sales – of just under 60 per cent, compared to its more ambitious January goal of 57 per cent.

The country’s largest railroad operator says revenues for the quarter ended March 31 rose five per cent year over year to $3.71 billion compared to $3.54 billion a year earlier.

Higher freight rates and coal and U.S. grain export volumes boosted revenue, but a smaller overall grain crop, fewer West Coast container shipments, global supply snarls and harsher winter weather all contributed to a net earnings drop of six per cent to $918 million last quarter.

On an adjusted bases, diluted earnings per share rose to $1.32 from $1.23 in the same period last year, slightly below analyst expectations of $1.38, according to financial data firm Refinitiv.

Bank of Canada faces ‘delicate balance’ as it raises rates, Macklem says

The Bank of Canada faces a “delicate balance” as it tries to bring inflation back down without slowing the economy too much and triggering a recession, Governor Tiff Macklem said on Monday.

The Canadian economy is in a relatively good position to handle rising interest rates, Mr. Macklem said in an appearance before the federal finance committee. But he acknowledged that pushing the cost of borrowing sharply higher to try to quell rising consumer prices has some risks, particularly given the high level of household debt in Canada.

“Getting this soft landing is not going to be easy,” Mr. Macklem said, although he added that there are “some good reasons” to believe the economy will continue to grow as consumer prices decline.

The point of higher interest rates is to tamp down demand in the Canadian economy to bring it back in line with the country’s supply capacity. But raising rates too fast and too high could trigger a housing market correction, choke off business investment and erode consumer confidence.

The Bank of Canada is in the early stages of an aggressive campaign to bring borrowing costs back up to normal levels after holding them at record lows for much of the pandemic. Two weeks ago, the bank’s governing council raised the benchmark policy rate by 50 basis points to 1 per cent – the first oversized increase in two decades. It usually moves in quarter-point increments.

Mr. Macklem said on Monday that the governing council will likely consider another hike of 50 basis points for the June 1 rate decision. He said an even larger increase was possible, although such a move would be “very unusual,” and reiterated that the bank intends to get its policy rate back up to between 2 and 3 per cent relatively quickly.

Robert Hogue, assistant chief economist at Royal Bank of Canada, said the possibility of a housing market correction “is not a big stretch,” given how much real estate prices have increased over the past two years.

“The kind of [interest rate] increases that we’re contemplating and the market is now pricing in … would constitute a fairly significant change for the market to adjust to and to absorb,” Mr. Hogue said in an interview.

“As central bankers, they have to be mindful of not just triggering a correction, but something that’s deeper, and could be destabilizing.”

Mr. Macklem told the finance committee there are several reasons to believe the Canadian economy will be able to continue growing over the coming years while also bringing inflation down. Many of the factors driving inflation – which hit an annual rate of 6.7 per cent in March – are the result of global supply chain disruptions caused by the COVID-19 pandemic and spikes in commodity prices resulting from Russia’s invasion of Ukraine.

“If oil prices stop going up … and these global supply chain pressures begin to abate, we should see some natural reduction in inflation provided we keep inflation expectations well anchored,” Mr. Macklem said.

He also suggested that there’s room to cool the overheated job market without too many people actually losing their jobs. Right now, the country has a huge number of job vacancies; Statistics Canada said employers were actively recruiting for more than 800,000 vacant positions in January.

“I won’t pretend it isn’t delicate,” Mr. Macklem said. “But with an economy that is in excess demand with a labour market that’s got very high levels of vacancies, if we can get this right, we can reduce those vacancies, keep strong employment and get inflation back to target.

“That’s our aim. Are there some risks? Yes, there are some risks.”

Mr. Macklem and his team are hoping that Canadian consumers will do much of the heavy lifting to keep the economy out of recession even as monetary policy gets tighter. Household balance sheets are in relatively good shape, with many Canadians having built up savings over the past two years. The Bank of Canada estimates that Canadian households have built up around $200-billion in “excess savings,” compared with what they would have saved before the pandemic, which could support robust consumer spending even in the face of higher interest rates.

At the same time, Mr. Macklem acknowledged that the Bank of Canada does not have a good line of sight into global supply problems, which makes economic forecasting extremely difficult.

And he admitted the bank was wrong on a number of things over the past year.

“We got a lot of things right, we got some things wrong. We are responding,” Mr. Macklem said.

Mr. Hogue of RBC said his base case for the next two years does not include a recession. That said, the longer inflation remains elevated, the higher the risk that the Bank of Canada will need to raise rates to punishing levels.

“If the inflation rate over the next few months starts to come down, then maybe the risk might start to shift. But right now, things don’t look necessarily good, especially after the March [inflation] numbers that caught more or less everybody by surprise. … It does raise a higher risk of a harder landing at large in the economy,” Mr. Hogue said.

RBC and CIBC join banking group helping to finance Elon Musk’s bid for Twitter

Royal Bank of CanadaRY-T -0.87%decrease and Canadian Imperial Bank of CommerceCM-T -0.32%decreaseare lining up behind Elon Musk’s US$44-billion takeover of Twitter Inc., with the two Canadian banks putting US$1.15-billion into the lowest-risk loan to the Tesla Inc. chief executive officer.

Mr. Musk announced a deal to buy social-media platform Twitter on Monday using US$25.5-billion borrowed from a dozen banks, led by Morgan Stanley. The world’s richest person, with a net worth of more than US$250-billion, will tap his own capital for the remainder of the purchase price.

The largest element of the Twitter financing is a US$12.5-billion loan backed by a portion of Mr. Musk’s 17-per-cent stake in Tesla, which is currently worth about US$170-billion.

RBC and CIBC are among 12 banks involved in this loan, according to regulatory filing. RBC pledged US$750-million and CIBC put up US$400-million. The lead bank on the entire financing, Morgan Stanley, promised US$2-billion.

The package also includes an unsecured US$3-billion bridge loan – money borrowed with no collateral – and a US$6.5-billion seven-year term loan. The risks that come with each level of debt are reflected in the interest rates the banks are charging Mr. Musk.

On the loan secured by his Tesla shares, Mr. Musk will pay an interest rate that is three percentage pointsover the benchmark secured overnight financing rate (SOFR), which was about 1.04 per cent on Monday. The banks also charged Mr. Musk a US$62.5-million fee to set up the loan.

The Canadian banks’ funding is the lowest-cost debt in the Twitter financing package, and therefore the least risky loan. In the worst-case scenario, with Mr. Musk defaulting on the loan and the banks seizing his Tesla shares, lenders are likely to be repaid in full. RBC’s analyst who follows Tesla currently has a US$1,175-per-share target price on the auto maker, which is 18 per cent higher than where Tesla shares were trading on Monday.

Canadian banks are conspicuous in their absence from the remainder of Mr. Musk’s loans, which come at far higher interest rates. The $6.5-billion term loan pays 4.75 percentage points over SOFR and there is a US$3-billion secured bridge loan with a rate set at 6.75 percentage points over the benchmark. Mr. Musk is pledging his stake in Twitter as collateral for both loans.

The most expensive debt, a US$3-billion unsecured one-year bridge loan, sees Mr. Musk pay 10 percentage points over SOFR to seven banks, including two Japan-based lenders – MUFG and Mizuho – and two banks from France, BNP Paribas and Société Générale.

Buyers typically move quickly to pay down bridge loans after takeover. However, Mr. Musk is not a typical dealmaker. At a conference in Vancouver earlier this month, Mr. Musk said his offer to buy Twitter is “not a way to make money” and stated “I don’t care about the economics at all.”

In announcing an agreement with the Twitter board on Monday, Mr. Musk said in a press release: “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.”

Mr. Musk, who studied at Queen’s University in Kingston for two years before earning degrees at U.S. schools, said he wants to improve Twitter “by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”

Along with Morgan Stanley, Mr. Musk’s financial advisers are BofA Securities and Barclays. Goldman Sachs & Co. LLC, J.P. Morgan, and Allen & Co. are serving as financial advisers to Twitter.

Canada PM Trudeau announces investigation into Freedom Convoy protest ‘evolution,’ emergency order

Canadian Prime Minister Justin Trudeau announced Monday a new commission tasked with investigating his historic use of emergency powers to quell the Freedom Convoy protest months ago. 

Trudeau announced Monday the establishment of the Public Order Emergency Commission, an independent public inquiry following the invocation of the Emergencies Act.

The commission will examine the circumstances that led to the declaration being issued and the measures taken in response to the emergency, including what Trudeau categorized as “the evolution of the convoy, the impact of funding and disinformation, the economic impact, and efforts of police and other responders prior to and after the declaration.” 

CANADA POLITICIAN CHARGED BY OTTAWA POLICE OVER FREEDOM CONVOY TRUCKERS’ PROTEST 

Trucks parked in Ottawa on the 19th day of the Freedom Convoy protest (Fox News Digital/Lisa Bennatan)

Trudeau evoked the Emergencies Act for the first time in Canada’s history during February’s Freedom Convoy protest in the capital city of Ottawa. In doing so, he granted the federal government temporary powers to quell truckers and others protesting COVID-19 vaccine mandates and other pandemic-related restrictions and freeze the bank accounts of those suspected of supporting the convoy.   

The emergency powers were lifted on Feb. 23. 

Supporters and truckers front the Parliament Hill during a protest in downtown of Ottawa, Canada, on February 12, 2022.  Justin Trudeau, Canada’s prime minister, during a news conference from the National Capital Region in Canada on Monday, Jan. 31, 2022.  (Photo by Mohamed Kadri/NurPhoto via Getty Images  |  Adrian Wyld/The Canadian Press/Bloomberg via Getty Images)

Trudeau appointed Judge Paul S. Rouleau as commissioner of the Public Order Emergency Commission. Rouleau is expected to submit a final report to the Canadian government of his findings and recommendations, which must be tabled in the House of Commons and Senate by Feb. 20, 2023. Under Part I of the federal Inquiries Act, the commissioner has the power to summon witnesses under oath and require them to provide documents or other items the commissioner considers necessary to carry out their work, according to Trudeau’s office. 

CBC reported that a special joint committee of seven Members of Parliament and four senators had already begun reviewing the use of the Emergencies Act in March but has not yet released its findings.

CLICK HERE TO GET THE FOX NEWS APP

This comes after CTV News reported Sunday that the Canadian federal government will cover the approximately $35 million price tag for policing costs during the three-week-long Freedom Convoy. 

The federal government will receive additional funding through its National Capital Extraordinary Policing Costs program to offset all costs incurred by the Ottawa Police Service during the protest. The Royal Canadian Mounted Police, Ontario Provincial Police and several municipal police forces were deployed to clear trucks and other vehicles from downtown Ottawa near Parliament Hill.