Q3 2023 Air Canada Earnings Call

Yeah.

Good morning, and welcome to Air Canada's third quarter 'twenty to 'twenty three o'clock French call.

All participants are in a listen only mode. After the speaker's presentation, we will conduct a question and answer session.

To ask a question you will need to press star followed by the number one on your telephone keypad.

As a reminder, this conference call is being recorded.

I'd now like to turn the call over to Valerie <unk> head of Investor Relations and corporate sustainability at Air Canada. Thank you. Please go ahead.

Thank you Julianne Hello, Boswell, none that's causing blurred between us.

At the end of December then Tor welcome and thank you for attending our third quarter earnings call of 2023 joining.

Joining us this morning are Michael Rousseau, our president and CEO, Mark Gallardo, our executive Vice President of revenue and network planning and John D. Burke, Our executive Vice President and CFO. Other members of the executive team are also with us today.

Mike will begin this call with a brief overview of the quarter, followed by Mark with comments on our revenue network updates and demand trends John will cover our financial performance and guidance before turning it back to Mike.

We'll then take questions from equity analysts.

Our comments and discussion today may contain forward looking information about air Canada's outlook objectives, and strategies that are based on assumptions and subject to risks and uncertainties. Our actual results could differ materially from any stated expectations. Please refer to our forward looking statements and air Canada third quarter news release available on Air Canada.

Dot com and on SEDAR, plus and now I'd like to turn the call over to Mike.

Thank you Valerie and good morning to everyone.

Sure.

Thank you for joining us today.

We are very pleased with the results and the solid three quarters behind us.

Air Canada's operating revenues for the quarter totaled about $6 3 billion.

Up 19% from the third quarter 2022.

Our operating income increased by 771 billion to $1 4 billion with an operating margin of 22, 3%.

Passenger revenues were nearly 22% higher year over year.

Mark will provide more details on our on our revenues and the ongoing demand environment, which remains very stable.

Aeroplan membership.

Continues to grow.

Gross billings in redemptions also surpassed third quarter 'twenty two levels.

Adjusted EBITDA grew by $773 million to $1 8 billion for the quarter.

This translates into a market, leading adjusted EBITDA margin of nearly 29%.

Adjusted net income of 1.281.

Billion approved $850 million year over year.

This brings us to an adjusted EPS of $3 41, compared to an adjusted EPS of $1 seven a year ago.

We ended the quarter with nearly 10 billion in liquidity, while at the same time, making progress on our state of goal of reducing leverage.

And John will cover this in his remarks.

The summer is always a peak travel season in Canada.

Due to our careful preparations we captured more than our share of traffic.

And flew in excess of $12 6 million customers in the period.

This was a 10% increase year over year.

Which resulted in an historic system load factor of almost 90%.

While this signals that we use our assets very effectively one consequence is that puts extra pressure on the operations.

That said our on time performance improved throughout the quarter.

With a nine percentage point boost from July to August.

Another eight percentage point sequential improvement in September.

And continued improvement in October.

I, thank all our employees and management team for their hard work and safely transporting all of our customers during the busy and demanding summer season.

And their efforts are noted by our customers for the fifth straight year, we were voted North America's favorite airline for 2023 in August and the <unk> Awards, which are geared to the important 25% to 45 year old market.

This followed on awards early this summer at the Skytrax World Airline Awards, where we won the world's most family friendly airline and awards for best airline in Canada, and best airline staff in Canada.

And through their empathy and care, our people distinguish themselves and other more important ways.

We operated extra flights to Yellowknife in August to help evacuate residents from wildfires.

And this month, we coordinated special flights with the government of Canada to bring Canadians home due to the conflict in the middle East.

These flights.

Take a tremendous amount of work and planning and I. Thank all our teams for this.

It is with great sadness, we witness a terrible impact of this situation on civilians and sincerely hope for a peaceful resolution soon.

We continue to monitor the situation closely safety is always our number one priority and we will reassess what our return is possible.

Before I pass the call to Mark I want to thank our customers for entrusting their travel with us and for their loyalty to our company.

We know we must earn this loyalty everyday which is why we are elevating our customers. They can make elevating our customer service a top priority for air Canada.

Thank you Ms Betsy Mark over to you.

Thanks, Mike and good morning, everyone.

All right.

Or do you think bush LG Joanne MFC to when it was all pretty equal.

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I'd like to thank our employees for delivering impressive quarterly results.

Passenger revenues in the third quarter totaled $5 9 billion a record.

That's an increase of over 1 billion from the third quarter of 2022.

This increase was propelled by our effective network diversification strategy, which delivered strong results on our international network.

We've built scale at our hubs and we've leveraged our partnerships to drive a strong and growing internationally focused airline.

Signifying people's eagerness to travel abroad over the summer revenues for international services increased 32% year over year, our domestic and Transborder revenues rose, 3% and 23% respectively.

But most importantly, our yield games.

Demand continues to track above 2019 levels.

This combined with the capacity constraints that the global industry level has continued to favor the yield environment, especially for international markets.

Performers, where Atlantic and Pacific, where we saw year over year yield increases of about 13 and 11% respectively.

Most of the new international routes met or exceeded expectations, and we look forward to launching promising new routes, such as Vancouver, Dubai, and Vancouver, Singapore over the coming months.

We witnessed continued strength in our premium revenues to.

Which increased 21% from the third quarter of 2022.

This strength was across all markets for both leisure and business customers.

Although we saw premium revenue gains were pleased to see our premium and economy cabins deliver similar and proportional gains as well.

The density of our cabin configurations on our wide body aircraft insurers that were not entirely dependent on premium premium performance to drive overall revenue results.

Other passenger revenues increased 10% from the same quarter last year, thanks to a solid contribution from air Canada vacations.

We saw strong demand multi for services in the Caribbean as well to Mexico.

We'll be launching our new service in Monterrey, Mexico in just a matter of weeks.

Throughout 2023, we made some capacity adjustments to account for a regional pilot availability and supply chain pressures to name, but a few.

As a result of these ongoing headwinds and with the immediate effects and the suspension of our Tel Aviv routes. We now expect full year system ASM capacity to be 20% above 2022 levels.

And as we look to Q4 2023 and early signals into 2024, we continue to witness stable demand indicators.

For the fourth quarter of 2023, we plan on increasing our system ASM capacity by about 10% from the same quarter in 2022.

We see a strong opportunity to redeploy capacity into the Asia Pacific sector over the coming months.

And as we take advantage of this opportunity we are increasing our capacity to Japan and Korea.

Adding frequency to our successful new route to Bangkok, and and then adding an additional red eye flights in Vancouver to Hong Kong.

We're assessing further opportunities to reallocate capacity in the region as we believe the demand and yield singles will continue to be favorable throughout the coming months.

And looking to the future, we're very excited to be adding the Boeing 77 Dash 10 to our fleet in late 2025.

This aircraft will replace existing wide bodies that are reaching end of life and its size will allow us to add premium seating and increase overall seat count on many of our existing routes.

This aircraft will also enhance our cargo proposition offering to additional pallet positions versus the 787 dash nine that we operate currently today.

Turning to cargo revenues in the third quarter of 2023 declined $66 million from the third quarter 2020 to give you a lower yields in all markets, resulting from continued softness in demand.

And although it's relatively early signals observed from the market demonstrate upticks in demand and in yield.

I think the entire team at Air Canada for their dedication their hard work is the cornerstone of our accomplishment.

John over to you.

Thank you Mark good morning, everyone.

Mike spoke to our financial performance generally and Mark touched on our strong passenger revenues I'll begin with our third quarter operating expenses, which grew 5% to $4 9 billion.

Collecting 14% growth in revenue passenger miles of total capacity increase of 10%.

And were mitigated by a better fuel backdrop versus Q3 2022.

Total CASM was down by 4% driven by lower aircraft fuel expense as a result of a 23% year over year decline in jet fuel prices, including the impact of a $68 million fuel hedging gains recorded in the quarter.

As we did for Q3, we have chosen to protect a portion of our Q4 fuel consumption.

Early in the quarter, we hedged 45% of our projected Q4 fuel requirements.

Our hedging positions in the second half of the year reflect our prudent approach to managing the current volatility in fuel prices.

In an environment with continued good visibility unrealized bookings.

Adding some color on our key operating cost items.

In Q3, we saw a 17% rise in wages salaries and benefits year over year on an FTE increase of 13% as we staffed our employee levels in support of our summer peak operations.

Cost increases for spend categories, such as sales and distribution and catering are also seeing increases that are correlated to higher yields and higher premium cabin revenues.

Overall adjusted CASM in Q3 is five 6% higher than prior year.

Year to date 2023, our adjusted CASM is $13 <unk>.

Versus 13.

For the first nine months of 2022.

This represents a one 6% increase.

The slight pressure, we have been seeing in our unit cost guidance in the second half is mainly due to lower than planned capacity growth.

We now expect 2023, adjusted CASM to come in at around one 5% to 225% above 2022 levels.

As we look beyond 2023, we do anticipate some continuing cost pressures from an evolving regulatory environment.

<unk> airport rates and charges as well as the potential impact of a pilot agreement renewal.

We do however expect to begin stabilizing our overall unit cost operating costs as we enter a period of early productivity improvements.

We are factoring all of these elements into our plans going forward.

And we will provide updates for 2024, when we report our full year earnings at our Q4 analyst call.

Let me now turn to cash generation debt management and liquidity.

We're pleased with our third quarter positive free cash flow of $135 million.

Operator: Good morning and welcome to Air Canada's third quarter 2023 conference call. All participants are in a listen only mode. After the speaker's presentation, we will conduct a question and answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.

We continue to pay down debt in Q3.

In September we prepaid a total of $589 million an aircraft financing.

The amount of debt prepayments now stands at about $1 $87 billion.

Since we relaunched more normal operations in the second half of 2022.

Valerie Ducca: I would now like to turn the call over to Valerie Ducca, head of investor relations, and corporate sustainability at Air Canada. Thank you, please go ahead. Thank you, Julianne.

With this latest prepayment we are bringing our unencumbered asset pool value to approximately $6 7 billion.

Valerie Ducca: Hello, Bonjour, et bienvenue à 3e revue-trimesse-trier de 2021. Welcome and thank you for attending our third quarter earnings call of 2023. Joining us this morning are Michael Rousseau, our president and CEO. Mark Galardo, our Executive Vice President of Revenue and Network Planning, and John D. Bert, our Executive Vice President and CFO. Other members of the Executive Team are also with us today. Michael will begin this call with a brief overview of the quarter.

Excluding the value of airplanes.

We ended the third quarter with $9 9 billion and total liquidity and a leverage ratio of one four down from five one at the end of 2012.

We have made deleveraging financial priority for Air, Canada, and our strong cash flow and liquidity position will give us flexibility and confidence to invest in our growth.

Moody's recent upgrade of our corporate family rating of <unk> from three <unk>.

And maintenance of a stable outlook prove that these efforts and our strong operating income are being recognized.

Unknown Executive: [inaudible] We are looking statement in Air Canada's third quarter news release available on AirCanada.com and on Cedar Plus.

This rating is one notch below our highest Moody's rating, which was in place prior to the pandemic.

As a matter of note advanced ticket sales were $4 5 billion at the end of the quarter.

Down about 20% from the June level, and consistent with pre pandemic seasonal trends and expectations.

Michael Rousseau: And now I'd like to turn the call over to Mike. Thank you, Valerie, and good morning to everyone. Bonjour to the moment. Thank you for joining us today. We are very pleased with today's results in the solid three quarters behind us. Air Canada's operating revenues in the quarter total about 6.3 billion. Up to 19% from the third quarter of 2022. Our operating income increased by 771 million to 1.4 billion with an operating margin of 22.3%, passenger revenues were nearly 22% higher the year-over-year.

Now turning to our fleet.

Operating a modernized fleet with optimized and efficient aircraft is fundamental to our long term growth and our profitability and sustainability strategies.

We expect two remaining 77 dash nines to be delivered in 2024.

And we have recently announced the acquisition of <unk> Boeing 787 Dash 10 Dreamliner aircraft.

With options for 12 or more.

The deliveries are set to begin in late 2025 with the last aircraft scheduled for delivery in Q1 2027.

Marc shared some excitement about this aircraft now allow me to share more reasons why we're thrilled to add this aircraft to our fleet.

Michael Rousseau: Mark will provide more details on our revenues and the ongoing demand environment, which remains very stable. Arrow plan membership continues to grow. Rose Billings and Redemptions also surpassed third quarter of 22 levels. Adjusted EBITDAF grew by 700 and 73 million to 1.8 billion for the quarter. This translates into a market leading adjusted EBITDA margin of nearly 29%. Adjusted net income of 1.281 billion approved 850 million year-over-year. This brings us to an adjusted EPS of $3.41 compared to an adjusted EPS of $1.7 a year ago. We ended the quarter with nearly 10 billion in liquidity while at the same time making progress on our state of goal of reducing leverage.

First the 77 Dash 10 is the most efficient aircraft within its range.

Second our knowledge and familiarity with the 787 family will drive operational efficiencies optimize maintenance and the benefits that commonality offers such as spare parts provisioning and pilot training synergies.

As highlighted by Marc the new 780 Sevens offer optimized CASM and greater flexibility for growth.

We are confident that our customers are simply going to love this aircraft.

Additionally, we also are looking forward to welcoming the Airbus 321, XLR to our fleet with 25 aircrafts on order and deliveries to begin in 2025 and completing with the final aircraft.

John Bert: And John will cover this in his remarks.

Michael Rousseau: The summer is always a peak travel season in Canada. Due to our careful preparations, we captured more than our share of traffic. Public, and Blue in excess of 12.6 million customers in the period. This was a 10% increase your year, which resulted in an historic system load factor of almost 90%. While this signals that we use our assets very effectively, one consequence that puts extra pressure on the operations. That said, our on-time performance practically improved throughout the quarter. With a 9% point boost from July to August, another 8% point sequential improvement in September, and continued improvement in October.

In 2028.

Rounding out our order book is the completion of the remaining 27 Airbus <unk> hundred 20 deliveries planned between 2024 and 2026.

When complete we will be operating a fleet of $68 <unk>, an excellent aircraft for our domestic and Transborder markets.

We have updated our capital commitments disclosures to account for these fleet changes and other capital expenditures such as aircraft Reconfigurations maintenance and technology among others.

Now before I turn it back to Mike allow me to say a few words on how impressed I am with our air Canada team Im.

Im looking forward to working side by side with my colleagues as we develop our 2024 roadmap and as we chart the future of this iconic airline.

Michael Rousseau: I thank all our employees and management team for their hard work and safely transporting all our customers during the busy and demanding summer season. And their efforts are notified by our customers.

I see the people and the culture, our backbone of this company and I know that this will continue to elevate air Canada towards its long term aspirations.

Michael Rousseau: For the fifth straight year, we were voted North America's favorite airline for 2023 in August in the Trezee Awards, which are geared to the important 25 to 45 year old market. This followed on awards early this summer at the Sky Tracks World Airlines Awards, where we won the world's most family-friendly airline and awards for best airline in Canada and best airline staff in Canada. And through empathy and care, our people distinguished and felt in other more important ways.

Mike back to you.

Terrific. Thanks, John.

As I mentioned that start of the call. While we are pleased with our third quarter performance fees.

These results can only be fully appreciated in conjunction.

With the other strong quarters, we have reported so far this year.

While we are not updating our 'twenty four targets or providing 24 our guidance at this time.

I'd like to take a moment to walk you through our financial performance thus far.

Adjusted EBITDA approached $3 5 billion at the end of the third quarter compared to $1 1 billion in the same period last year.

Michael Rousseau: We operated extra flights to Yellowknife in August to help evacuate residents from wildfires. And this month, we coordinated special flights with the Government of Canada to bring Canadians home due to the conflict in the Middle East. These flights take a tremendous amount of work and planning, and I thank all our teams for this.

And was 16% higher than that in 2019.

Interesting to note is that our equity value as of October 20th has declined 12% versus the same day in 'twenty two.

About 50% of the same date in 2019.

Michael Rousseau: It is with great sadness we witnessed a terrible impact of this situation on civilians and severely hope for a peaceful resolution soon. We continue to monitor the situation closely. Safety is always our number one priority, and we will reassess when our return is possible.

Cumulative free cash flow was almost $2 1 billion year to date.

And at quarter's end, our leverage ratio was one four a major improvement from $5. One at the end of 'twenty two.

Air Canada is progressive performance proves the success of our strategy to grow back the airline.

Michael Rousseau: Before I pass a call to Mark, I want to thank our customers for entrusting their travel with us and for their loyalty to our company. We know we must earn this loyalty every day, which is why we are elevating our customers, making, we make elevating our customer service a top priority for Air Canada. Thank you, Ms. SV.

And improve operational stability, while mitigating risk.

Like most airlines, we continue to face challenges.

But our demonstrated that this too will be over these last nine months combined with the continuing stable demand environment.

Give us every assurance for the rest of the year and into 2024.

Mark Galardo: Mark, over to you. Thanks, Mike, and good morning, everyone.

We remain confident with our full year <unk> adjusted EBITDA guidance.

Mark Galardo: Hello, I am Eure de Trevebou. I would like to thank all of our employees for this impressive result. I would like to thank our employees for delivering impressive quarterly results, passenger revenues in the third quarter totaled 5.9 billion, a record. That's an increase of over a billion from the third quarter of 2022. This increase was propelled by our effective network diversification strategy, which delivered strong results on our international network. We've built scale at our hubs, and we've leveraged our partnerships to drive a strong and growing internationally focused airline.

At this point expect to land in the higher end of that range.

This involves more than simply staying the course.

We know we must continue to invest in our business and continuously improve to remain competitive.

Customers and maintain their loyalty.

Acquiring the Boeing 77 Dash 10, Dreamliner aircraft is one example.

But beyond our fleet, we continue to invest in products that earn a return by building greater appeal to two strategic customer segments like families and sixth freedom connections.

This includes a stunning new maple leaf lounge in San Francisco.

Mark Galardo: Signifying people's eagerness to travel abroad over the summer. Revenues for international services increase 32% year-to-year. Our domestic and trans-border revenues rose 3 and 23% respect. Executive, but most importantly are the yield gains. The man continues to track above 2019 levels. This combined with the capacity constraints of the global industry level have continued to favor the yield environment, especially for international markets. Best performers were Atlantic and Pacific, where we saw year over year yield increases of about 13 and 11 percent respectively.

And the unique co location arrangement at United Club Lounge in New works.

All new terminal way.

Going forward, we will.

We'll be adding expanding or renovating lounges in several key markets.

We're also renewing our aircraft interiors and upgrading onboard service as well.

Our success in these areas continues to be recognized.

We have won best airline for onboard entertainment for five consecutive years from global traveler at apex.

Which is September affirmed our five star rating and gave US is passenger choice award for Best Entertainment in North America.

Mark Galardo: Most of the new international routes met are exceeded expectations and we look forward to launching promising new routes such as Vancouver Dubai and Vancouver Singapore over the coming months. We witness continued strength in our premium revenues to which increased 21 percent from the third quarter of 2022. This strength was across all markets for both leisure and business customers. Although we saw premium revenue gains, we're pleased to see our premium and economy cabins deliver similar and proportional gains as well.

Aeroplan continues to deliver record performance.

By the end of the third quarter, we have doubled our active member base since the program was purchased in 2019.

This growth is fueled by in frequent but regular travelers who are engaging with our mark key everyday partners.

Millions of members are now linked or account between Aeroplan and leading brands like Uber and Starbucks.

Aeroplan remains a highly effective tool for retaining loyalty and influencing customer purchase decisions on air Canada, and we continue to pursue the many expansion opportunities available to us.

Mark Galardo: The density of our cabin configurations on our wide body aircraft ensures that we're not entirely dependent on premium premium performance to drive overall revenue results. Other passenger revenues increased 10 percent from the same quarter last year thanks to a solid contribution from Air Canada vacation. We saw strong demand multi for services of the Caribbean as well to Mexico and we'll be launching our new service of Monterey Mexico and just a matter of weeks.

We believe as others do that Aeroplan is one of the best loyalty programs in the world.

The accolades, we recently received by rewards Canada that are the top airline loyalty program top overall travel rewards credit card top airline credit card and top ultra premium credit card.

Mark Galardo: Throughout 2023, we made some capacity adjustments to account for regional pilot availability and supply chain pressures to name but a few. As a result of these ongoing headwinds and with the immediate effects from the suspension of our Tel Aviv routes, we now expect full-year system ASM capacity to be 20 percent above 2022 levels. And as we look to Q4 2023 and early signals into 2024, we continue to witness stable demand indicators.

Demonstrate that we continue to be Canada's top choice.

To support our product initiatives. We are also highly focused on service and the launch of our ECS program or.

Or elevating the customer experience.

To bolster all accident.

All aspects of the customer journey.

This is a multi year initiative and for 2024, we have dozens of important projects underway to improve everything from on time performance to onboard service and baggage handling.

It already is making a difference such as a double digit improvement in otp since July that I spoke about earlier.

Mark Galardo: For the fourth quarter of 2023, we plan on increasing our system ASM capacity by about 10 percent from the same quarter in 2022. We see a strong opportunity to redeploy capacity into the Asia Pacific sector over the coming months. And as we take advantage of this opportunity, we are increasing our capacity to Japan and Korea, adding frequency to our successful new route to Bangkok. And adding an additional red-eye flight from Vancouver to Hong Kong, we're assessing further opportunities to reallocate capacity in the region as we believe the demand and yield signals will continue to be favorable throughout the coming months.

And we continue to focus on our ESG goals.

The grassroots level nearly 200 air Canada employees, along with their friends family and customers recently participated in a shoreline cleanup events in Vancouver, Toronto, and Montreal, collecting 380 kilograms of waste.

And we are advancing through community involvement and by engaging with our customers.

One example is a hospital transportation program, which helps children fly for needed medical care and wafer probe.

And thanks to collaborative efforts of Canadian companies and dedicated Aeroplan members.

Mark Galardo: And looking to the future, we're very excited to be adding the Boeing 787-10 to our fleet in late 2025. This aircraft will replace existing white bodies that are reaching end of life, and its size will allow us to add premium seating and increase overall seat count on many of our existing routes. This aircraft will also enhance our cargo proposition, offering two additional pilot positions versus the 787-9 that we operate currently today.

More families to support than ever before this year, an astounding $67 7 million points Aeroplan points were raised during <unk> recently concluded annual Aeroplan point matching week by far the most successful point matching campaign and his two decade history.

I think our partners and Aeroplan members for their generosity.

We are proud of the collective impact we have on our communities and on Canadian families.

Mark Galardo: Turning to cargo, revenues in the third quarter of 2023 declined 66 million from the third quarter of 2022, given the lower yields and all markets resulting from continued softness in demand, and, although it's relatively early, signals observed from the market demonstrate upticks and demand and annealed. I thank the entire team at Air Canada for their dedication. Their hard work is a cornerstone of our accomplishment.

With that we're happy to take questions Mercy. Thank you Valerie.

Thank you Mike and thank you all for joining us this morning.

My mask on the vet contract that is something I think we're now ready to take your questions.

Did you take should you require further details following this call our Investor Relations team is available for support back to you Julien.

Thank you as a reminder to ask a question. Please press star followed by the number one on your telephone keypad.

John Bert: Thank you, John, over to you. Thank you, Mark.

John Bert: Good morning, everyone. I'll begin by the third quarter operating expenses, which grew 5% to 4.9 billion, reflecting 14% growth in revenue passenger miles, a total capacity increase of 10%, and we're mitigated by a better fuel backdrop versus Q3 2022. Total chasm was down by 4% driven by lower aircraft fuel expense as a result of a 23% year over year decline in jet fuel prices, including the impact of a $68 million fuel hedging gain recorded in the quarter.

Interest of time, we ask that you. Please limit yourself to one question and one follow up thank you.

Our first question comes from Kunal <unk> Gupta from Scotiabank. Please go ahead. Your line is open.

Thanks, operator, good morning, everyone.

Good morning, My first question. Good morning. My first question is on the capacity.

If I look at the last few quarters, you have been shipping all your capacity.

Little bit here and there.

Just wondering you have Tel Aviv situation now the supply chain issue, it's obviously ongoing ESG, but what's your confidence in Greece totaling more than 90% of capacity in 2024.

The iconic I'll start and then mark.

John Bert: As we did for Q3, we have chosen to protect the portion of our Q4 fuel consumption. Early in the quarter, we hedged 45% of our projected Q4 fuel requirements. Our hedging positions in the second half of the year reflect a prudent approach to managing the current volatility and fuel prices in an environment with continued good visibility on realized bookings. Adding some color on our key operating cost items in Q3, we saw 17% rise in wages, salaries, and benefits year over year on an FTE increase of 13% as we staffed our employee levels in support of our summer peak operations.

I'll add some color.

We are bringing some new planes in.

New plays but some lease planes in 2020 for both narrow body and a few wide bodies and so that will drive.

<unk>.

The majority of the capacity increase.

Plus we are.

Hopefully, making some operational improvements, where we're going to get a better utilization of our existing fleet.

Mark anything there.

Okay, It's mercado here.

So the supply chain issues and pilot issues that should be behind us in 24 with some additional fleet that we've got coming in and of course as you know in the summer we actually lost a triple 700 for a portion of the summer.

John Bert: Cost increases for spent categories such as sales and distribution and catering are also seeing increases that are correlated to higher yields and higher premium cabin revenues. Overall, adjusted chasm in Q3 is 5.6% higher than prior year. Year to date, 2023, our adjusted chasm is 13.2 cents versus 13 cents for the first nine months of 2022. This represents a 1.6% increase. The slight pressure we have been seeing in our unit cost guidance in the second half is mainly due to lower than planned capacity growth.

We're reasonably confident we'll be above that for 2004.

That's great. Thanks for.

For me for John.

If we look at the projected Capex table.

I think not a flex desalinates dash tens and other kind of changes you have been making.

It will be projections show anywhere between two and $5 billion for the next four fiscal years in terms of total capex.

Just wondering if those numbers are reasonable to us at Capex, when we calculate free cash flow.

Okay.

Yes, I think that.

We'll probably give you guys more color on the longer term capex and cash flows as we kind of get.

John Bert: We now expect 2023 adjusted chasm to come in at around 1.5 to 2.25% above 2022 levels. As we look beyond 2023, we do anticipate some continuing costs for pressures from an evolving regulatory environment, updated airport rates and charges, as well as the potential impact of a pilot agreement renewal. We do, however, expect to begin stabilizing our overall unit cost operating costs as we enter a period of early productivity improvements.

Together over the next I guess couple of quarters as we look forward to 2004 and beyond but I would say for now.

What you should expect is that with the 780 sevens.

One 320 ones 26 will probably be the year that'll have the most overall.

Fleet cash flow consumption.

And yes, typically we do also spend above and beyond just the fleet commitments. So we do have recurring maintenance that we capitalize and so on so.

Largely speaking of course, Thats, a good proxy, but theres a little bit more capex and just what's on that table that we would spend on a given year.

John Bert: We are factoring all of these elements into our appliance point forward and will provide updates for 2024 when we report our full year earnings at our Q4 analyst call.

Yes, just to add on that.

We're very excited about bringing three incredible aircraft into the into the system in the middle of the decade.

John Bert: Let me now turn to cash generation, debt management and liquidity. 30. We're pleased we're at third quarter positive free cash flow of $135 million. We continue to pay down debt in two three. In September, we prepaid a total of $589 million in aircraft financing. The amount of debt prepayments now stands at about $1.87 million. Since we relaunched more normal operations in the second half of 2022. With this latest prepayment, we are bringing our unentumbered asset pool value to approximately $6.7 billion, excluding the value of airline.

<unk>, the two <unk> and the of course, the <unk> and this although it's going to.

Increase our capex commitment in that period of time is going to reset air Canada's ambitions as we go forward.

Okay. Thanks for the color.

Thank you.

Our next question comes from Walter <unk> from RBC Capital markets. Please go ahead. Your line is open yes. Thanks very much very good morning, everyone. So Mike can you talk a little bit about your fleet as it stands now in terms of.

You just mentioned you're bringing on some some great aircraft.

Are you looking at any other you focus and obviously very strong in international or are you looking at any other additions to the wide body fleet.

John Bert: We ended the third quarter with $9.9 billion in total liquidity and a leverage ratio of 1.4 down from 5.1 at the end of 2020. We have made the leveraging financial priority for our Canada and our strong cash flow and liquidity position will give us flexibility and confidence to invest in our growth. Moody's recent upgrade of our corporate family rating of BA2 from BA3 and maintenance of a stable outlook proved that these efforts and our strong operating incomes are being recognized.

You haven't spoken about recently is there any new aircraft that are catching your eye that you think would fit into your strategy of.

Of capitalizing on some of your international strengths or do you think that the fleet no as you.

As you've announced it know should.

Should be the type of fleet makeup that we're going to we should expect for the next several years.

Hey, Good morning, Walter first of all we love looking at new aircraft.

John Bert: This rating is one notch below our highest Moody's rating, which was in place prior to the pandemic. As a matter of note, advanced ticket sales were $4.5 billion at the end of the quarter, down about 20% from the June level, and consistent with pre-pandemic seasonal trends and expectations.

There is some some very efficient exciting aircraft out there in the marketplace being developed.

And certainly it's our job to make sure that we are well aware of what's coming on market.

How does it fit into our strategic plan for.

For the time being whats on the table, we will setup satisfy our ambitions.

Certainly in the back half of the decade.

John Bert: Now, turning to our fleet, operating a modernized fleet with optimized and efficient aircraft is fundamental to our long-term growth and our profitability and sustainability strategies. We expect to remain 787-9 to be delivered in 2024, and we have recently announced the acquisition of 18.787-10 Dreamline aircraft. With options for 12 more, the deliveries are set to begin in late 2025 with the last aircraft scheduled for delivery in Q1, 2027. Mark shared some excitement about this aircraft.

Look again potentially as is.

Our.

As we look for more growth and potentially some other wide bodies, but we don't see that happening until at least the back half of the decade.

Okay. That's great. Thank you for that and in the booking curve and I know we asked this question every quarter, but any additional detail that you can provide on how the next three months is shaping up I know.

Certainly from a number of our consumer and even our financial analysis of analysts today is.

Talking about the impact that higher interest rates youre going to have on Canadians as they renew their mortgages and certainly disposable income is a big factor in choosing.

John Bert: Allow me to share more reasons why we are thrilled to add this aircraft to our fleet. First, the 787-10 is the most efficient aircraft within its range. Second, our knowledge and familiarity with the 787 family will drive operational efficiencies, optimized maintenance, and the benefits that commonality offers, such as spare parts provisioning, and pilot training synergies. As highlighted by Mark, the new 787s offer optimized chasm and greater flexibility for growth. Finally, we are confident that our customers are simply going to love this aircraft.

Two two.

To purchase Airfreight flight.

Flights and so on and I'm, just curious what youre seeing in terms of the booking curve or are you seeing any impact at all on a.

On lower discretionary income by Canadians at all when you look out to that book.

Booking curve.

Hi, Walter.

Mark here on on the booking curve, it's in line with expectations.

We see relatively strong demand for Q4 and almost every single geography that we operate in almost every single segment that we operate in.

John Bert: Additionally, we also are looking forward to welcoming the Airbus 321-XLR to our fleet with 25 aircraft on order and deliveries to begin in 2025 and completing with the final aircraft due in 2028. Rounding on our order book is the completion of the remaining 27 Airbus 8-20 deliveries plan, and between 2024 and 2026. When complete, we will be operating a fleet of 68-20s, an excellent aircraft for domestic and transporter markets. We have updated our capital commitments to schoolers to account for these fleet changes, and other capital expenditures such as aircraft reconfiguration, maintenance, and technology among others.

There is a lot of additional market capacity. So I mean that is one variable but in terms of demand.

It's quite stable in line with expectations and we're not seeing any any major slowdown at this point in time.

And sort of the diversification of our network gives us a lot of options to move capacity around if we do see a slowdown in one particular geography.

Okay. That's great I appreciate the color. Thank you.

Our next question comes from Kevin Chiang from CIBC. Please go ahead. Your line is open.

Hi, Thanks, Thanks for taking my question.

Let me turn it back to the to the fleet expansion plans.

Obviously.

Exciting investments.

I guess when you look at the addition, the additional wide bodies does that does that require additional regional aircraft or or.

John Bert: Now, before I turn it back to Mike, allow me to say a few words on how impressed I am with our Canada team. I'm looking forward to working side-by-side with my colleagues as we develop our 2024 roadmap and as we chart the future of this iconic airline. I see the people in the culture are a backbone of this company, and I know that this will continue to elevate Air Canada towards its long-term aspirations.

Or smaller narrow body aircraft investments to improve regional lift to increase we get a lift.

Okay.

It's a match the expanded wide body capacity you have or does the regional that you have today.

Do you guys think sufficient.

Hi, Kevin Hysterectomies take out let me take a stab at that.

Michael Rousseau: Mike, back to you. Terrific, thanks, John. As I mentioned at the start of the call, while we are pleased with our third quarter performance, these results can only be fully appreciated in conjunction with the other strong quarters we have reported so far this year.

We don't see any traditional regional aircraft at this at this point in time.

We've got a quite a sizable order book of 800 Twenty's to come.

A lot of those will be deployed into the into the U S, where we could leverage additional sixth freedom opportunities.

So we're at this point in time more regional feed is certainly not in the cards and with the fleet that we've got coming I think we're pretty sufficient.

Michael Rousseau: While we are not updating our 24 targets or providing 24 guidance at this time, I like to take a moment to walk you through our financial forms thus far. Adjusted EBITDA approached $3.5 billion at the end of the third quarter compared to $1.1 billion in the same period last year, and was 16% higher than that in 2019. Interesting to note is that our equity value as of October 20 has declined 12% versus the same day in 22, and is about 50% of the same day in 2019.

Thank you Kevin.

More color thee, the 18 Dreamliners are replacement.

Correct.

Kevin that's a capital a bit for your follow up.

Sure sorry.

Hopefully this is better.

And maybe just.

At a macro level on the back of <unk> question.

Removed about 3% of your expected capacity. This year I know, there's been a bunch of moving parts, but maybe from a.

<unk> perspective are you seeing that getting backfill from from other airlines.

Michael Rousseau: Tune with a free cash flow was almost $2.1 billion a year a day, and at quarter's end, our leverage ratio was $1.4, a major improvement from $5.1 at the end of 22. Air Canada's progressive performance proves the success of our strategy to grow back the airline and improve operational stability while mitigating risk. Like most airlines, we continue to face challenges, but are demonstrated that this will be over these last nine months, combined with a continuing stable demand environment, give us every assurance for the rest of the year and into 2024.

Whether it's within Canada or international carriers that are that are looking to take advantage of that or is the competitive environment pretty stable, even as you've adjusted your capacity through the year here.

Yeah, Kevin did the competitive environment is very robust as you note rate on domestic Canada, we have numerous.

Competitors, and it's a very competitive market.

But for US we've really focused on building up our hottest in scale at our hubs and Thats been our focus and I think thats been pretty good so far.

And competition will continue to to evolve in particular, we've seen some moves into into seasonal markets, but.

Michael Rousseau: We remain confident with our full year 23 adjusted EBITDA guidance, and at this point expect to land in the higher end of that range. This involves more than simply staying in the course. We know we must continue to invest in our business and continuously improve to remain competitive and attract customers and maintain their loyalty. According to Boeing 787-10 Dreamliner aircraft is one example. But beyond our fleet, we continue to invest in products that earn a return by building greater appeal to strategic customer segments like families and six freedom connections.

But I think overall.

The strength of our network.

The positioning of our hubs puts us in a pretty good position.

Perfect. Thank you for taking my questions.

Our next question comes from Matthew Lee from Canaccord Genuity. Please go ahead. Your line is open.

Hi, Good morning, all thanks for taking my question I wanted to start with demand Brian I know you've commented there is no slow down overall, but have you seen any shift in terms of domestic and international and the way that the U S carriers I know you called the Pacific and Atlantic travel.

But do you see a meaningful growth delta in terms of domestic international expecting going forward.

Michael Rousseau: This includes a stunning new Maple Leaf Lounge in San Francisco, and a unique co-location arrangement at the United Club Lounge in New Works, all new TURL-A. Going forward, we will be adding expanding or renovating lounges in several key markets. Americans. We are also renewing our aircraft interiors and upgrading onboard service as well. Our success in these areas continues to be recognized. We have one best airline for onboard entertainment for five to the second of years from global traveler and apex, which in September affirmed our five star rating and gave us its passenger choice award for best entertainment in North America.

Hi, Matt it's Mark here, so what we're seeing so far is.

We've seen a shift to international markets, we observed the shift for the better part of the last two years I would say so there's really nothing materially different. The one thing that we are observing is theres still a lot more recovery last on the Pacific and the Pacific market continues to be sort of like a very good opportunity for us to step in.

Two.

So we are actually going to be shifting a little bit of capacity in Q4, and Q1 away from the north Atlantic into the Pacific to really see some of that opportunity.

Okay, Great and then maybe in a similar vein can you maybe just talk about the demand you're seeing in terms of premium cabins versus perhaps tenuous economy.

Michael Rousseau: Aeroplane continues to deliver record performance. By the end of the third quarter, we have doubled our active member base since the program was purchased in 2019. This growth is fueled by infrequent but regular travelers who are engaging with our marquee everyday partners. Millions of members have now linked their account between aeroplane and leading brands like Uber and Starbucks. Aeroplane remains a highly effective tool for retaining loyalty and influencing customer purchase decisions on Air Canada and we continue to pursue the many expansion opportunities available to us.

Yes, no demand for premium continues to be strong in fact that at pace with prior.

Prior year.

Okay. That's helpful. Thanks.

Our next question comes from Savi <unk> from Raymond James. Please go ahead. Your line is open.

Hey, good morning, just curious on the on the cargo front you talked about maybe early signs of.

Improving but.

But you also kind of changed your fleet strategy on the cargo France.

Any kind of revised thoughts as we look at kind of the next one to three years on how that should progress.

Michael Rousseau: We believe, as others do, that aeroplane is one of the best loyalty programs in the world. The accolades we recently received by rewards Canada that are the top airline loyalty program, top overall travel rewards, credit card, top airline credit card and top ultra premium credit card demonstrate that we continue to be Canada's top choice.

Hi, Savi, it's Mike I'll start and Mark who will receive cargo will add some color.

We haven't changed our strategy.

We are still committed and excited about growing the freighter business. We've always we've always run and will continue to run at very strong belly business.

We did cancel.

Michael Rousseau: To support our product initiatives, we are also highly focused on service in the launch of our ECX program or elevating the customer experience. The bulls draw all aspects of the customer journey. This is a multi-year initiative and for 2024, we have dozens of important projects underway to improve everything from on-time performance to on-board service and baggage handling. And already, it is making a difference, such as a double-digit improvement in OTP since July that I spoke about earlier.

Triple seven freighters, because we just it was a little bit too early for us to take those into our into our network.

If you are looking to expand our 767 freighter business.

And build that business over time.

The market as you know has been soft it's weak.

We believe we've hit the bottom and we're starting to see some early signs of strengthening demand in yield.

And we will take full advantage of that with our with our with both our bellies and our freighters and again the freighters play an important role in providing cargo for our bellies.

Michael Rousseau: And we continue to focus on our ESG goals. The grassroots level nearly 200 Air Canada employees, along with their friends, family and customers recently precipitated in a shoreline cleanup event in Vancouver, Toronto and Montreal collecting 380 kilograms of waste. And we are advancing through community involvement and by engaging with our customers. One example is a hospital transportation program which helps children fly for needed medical care away from home. And thanks to collaborative efforts of Canadian companies and dedicated aeroplane members, more families are more than ever before.

And so that's a synergy that we have within our system.

That adds value.

<unk>.

On top of that as well.

The 77 Dash 10.

Order book of 18, plus 12 options.

So they have much more efficient cargo space and I believe they are.

Additional two palettes that.

But we could add to that so that compensate somewhat at a much better yield better much better.

Bottom line.

Potentially running two triple seven freighters.

I agree that sounds like a good plan.

If I might just on the business demand trends I Wonder if you can say what you.

Michael Rousseau: This year, in astounding, 67.7 million points, aeroplane points were raised during aeroplanes recently concluded annual aeroplane point matching week. By far, the most successful point matching campaign in its two-decade history. I thank our partners and aeroplane members for their generosity. We are proud of the collective impact we have on our communities and on Canadian families.

Are you seeing either on a year over year or relative to 2019.

No it's structurally above 2019.

And in particular on the traffic and on the yield side.

Each of our business cabinet like corporate recovery, just to make sure that I am sorry, corporate recovery. Okay. So corporate recovery relative to 2019 continues to be in the same range.

Valerie Ducca: With that, we're happy to take questions. Next week, thank you. Valor? Thank you, Mike.

The minus 25 to minus 30% range on the on the managed side, but we continue to see sustained recovery in the in the SME side and that gives us some interesting yield prospects like Florida.

Valerie Ducca: And thank you all for joining us this morning. We're now ready to take your question. Should you require further details following this call? Our investor relations team is available for support.

Operator: Back to you, Julian. Thank you.

Helpful. Thank you.

Our next question comes from Chris Murray from ATB Capital markets. Please go ahead. Your line is open.

Operator: As a reminder, to ask a question, please press star, followed by the number one on your telephone keypad. In the interest of time, we ask that you please limit yourself to one question and one follow up. Thank you.

Yeah. Thanks, So just going back to maybe the booking curve looking out into 'twenty for a little bit I guess, a couple of questions here one.

How are you how are you seeing sort of leisure traffic in terms of the curve and I'm just wondering.

Konark Gupta: Our first question comes from Konark Gupta from Scotia Bank. Please go ahead, your line is open. Thanks so much everyone. My first question, my first question is on on the capacity. So if I look at the last few quarters, you have been trimming for your capacity, you know, a little bit here and there.

There was a lot of pent up demand I think coming into last year.

Are you still seeing kind of echoes of that that demand as we go into this year or into 'twenty four and how is the aeroplan shaking some of that for you as well.

Okay.

Michael Rousseau: I'm just wondering, you have tell of these situation now, you know, the supply chain issues are obviously ongoing in the industry, but what's your confidence in re-stalling more than 90% of capacity in 2024? Iconic, I'll start and then Mark will add some color. We are bringing some new planes in, not new place, but some leaf planes in in 2024, both narrow body and a few wide bodies. And so that will drive the majority of the capacity increase.

So.

Good morning, just on the on the on the booking side of the booking curve on leisure I think we can we continue to pace with comparing ourselves to 2022 2023 in our prior call. We said some of the leisure demand indicators that were falling with demand for air Canada vacations that continues to be stable, especially when you consider that there is a significantly more market capacity.

In Q1 at 24 versus 23 in that geography, and then we're also tracking international leisure demand and we're tracking it not only for Q4 Q1, but also for Q2 and Q2 'twenty four and again, we are at pace or in some cases actually above where we were last year. So we're feeling reasonably confident that the.

Michael Rousseau: Plus, we are hopefully making some operational improvements where we're going to get a better utilization of our existing fleet. Mark, anything down? Yeah, no, Karna, it's Mark out here. You know, with some of the supply chain issues and pilot issues that, you know, should be behind this in 24 with some additional fleet that we've got coming in. And of course, as you know, in the summer, we actually, you know, lost a triple seven for a portion of the summer. You know, we're reasonably confident we'll be above that for 24. That's great. Thanks.

Leisure demand indicators continue to be stable.

Good morning <unk>.

Okay.

Okay.

Sorry, Chris There is just a follow up from Marc Mazur.

Chris Good morning, it's far faster I think you're going to ask about the European side, So maybe I'll give some additional color there.

So we look at two things in this regard we compare the behavior of customers that are repeat purchasers on air Canada that are Aeroplan members and are not Aeroplan members and then we also look at for the Aeroplan members. Those that are engaging with our everyday partners versus those that are not and in each of those cases as engagement in the program.

John Bert: And for maybe for John, if we look at the projected capex table, which I think now reflects the 787-10 and other kind of fleet changes you have been making, the projections show anywhere between two and five billion dollars for the next four fiscal years in terms of total capex. I'm just wondering if those numbers are reasonably used as capex when we calculate the cash flow? Yeah, I think that, you know, I mean, we'll probably give you guys more color on the longer-term capex and cash flows as we kind of, you know, get together over the next, I guess, a couple of quarters as we look forward 24 and beyond.

Steps up so does the frequency of purchase on our Canada and the likelihood to buy tickets directly to what we're seeing essentially is as an individual as a customer becomes more engaged and aeroplan progressively theyre more likely to have higher volume on air Canada to purchase higher quality tickets and more likely to purchase those tickets directly versus <unk>.

Our third party distribution sources.

Okay.

My other question I, just wanted to ask a little bit about the fleet changes you've talked about the fact that the 770 <unk> how they come in you're going to be taking out older.

John Bert: But I would say for now, what you should expect is that with the 787s, you know, in 321s, 26 will probably be the year that will have the most overall fleet cash flow consumption. And yeah, typically we do also spend above and beyond just the fleet commitments that we do have, you know, recurring maintenance that we capitalize and so on. Largely speaking, of course, it's a good proxy, but there's a little bit more capex and just what's on that table that we would spend on a given year.

Older aircraft, where exactly would you be pulling down some of those aircraft is that going to be the triple sevens are of that older 780 sevens that you'll be taking that.

So we havent yet determined.

What exactly is going to get potentially pulled out. So we've got two options, we can reduce our triple seven fleet.

Or we can reduce our 330 fleet or do both so we're looking at both options as you know our <unk> hundred 30 fleet is getting up there in age.

Some of our aircraft by the end of the decade will be close to 30 years of vintage. So we're looking at both options right now seeing which one will most likely come ahead.

John Bert: Yeah, I mean, just to add on that, I mean, we're very excited about bringing three incredible aircraft into the system in the middle of the decade. The tens, the 220s and, of course, the XLRs. And this, although it's going to, you know, increase our capex commitment in that period of time, it's going to reset air Canada's ambitions as we... Thank you.

On the Triple seven front some of the some of the issues that we're having with that fleet in particular as managing some of the seasonality and some of the range issues with that airplane.

Not necessarily concerned about the size of the airplane more than range capability and <unk> hundred <unk> is more a question of eight show over the coming I would say months will determine exactly which way we go here.

But the idea is that youll be youll allow for a little bit of growth, but but don't be thinking that.

Walter Spracklin: Our next question comes from Walter Spracklin, from RBC Capital Market. Please go ahead, your line is open. Yeah, thanks very much, I've already come morning everyone. So Mike, can you talk a little bit about your fleet as it stands now in terms of, you know, you just mentioned, you're bringing on some some great aircraft. Are you looking at any other, you focus and obviously very strong and international.

That it'll be 100% growth on the 77 tenths of that comment.

Yes, precisely and we've got a lot of Optionality here.

Alright, that's great. Thanks Brooks.

Okay.

Our next question comes from Helane Becker from TD Cowen. Please go ahead. Your line is open.

Walter Spracklin: Are you looking at any other additions to the wide body fleet that you, you know, you haven't spoken about recently, is there any new aircraft that are catching your eye that that you think will, would, would fit into your strategy of, of capitalizing on some of your international strengths, or do you think that the fleet now as you've, you know, as you've announced it now should, should be the type of fleet makeup that we're going to, we should expect in the, for the next several years. Good morning, Walter.

Hi, Thanks, very much operator, hi, everybody and thank you for the time.

<unk>.

I think John you mentioned costs associated with the regulatory changes.

Wondering what you were talking about and what the impact of those costs might be.

Sure. So we've seen duty time for pilots be one of the stressors that.

We have in our cost structure, that's kind of evolved a little bit so with some changes in Canada here in the last year and we also have some API regulation that.

We are in the process here in Canada.

Walter Spracklin: First of all, we love looking at a new aircraft. There is, there is some very efficient, exciting aircraft out there in the marketplace are being developed and certainly it's our job to make sure that we are well aware of what's coming on market and how does it fit into our strategic plan. For the time being, what's on the table will satisfy our ambitions, certainly in the back half of the decade, we're going to have to look again potentially as, as our, as our, as we look at for more growth, and potentially so other wide bodies, but we don't see that happening until at least the back half of the decade back half of the decade.

Completing or finalizing with the transport Minister so in the agency. So in both cases those would be some additive pressure to our cost structure I think in the whole there'll be.

Can be managed within the overall cost structure, but certainly those would be incremental to the current cost base.

Right, but are we talking about a magnitude of hundreds of millions of.

Of dollars or tens of millions of dollars.

Well I think what yet to be determined on the final constitution of what those changes might be.

But like I said I mean.

Hundreds of millions would feel heavy.

But certainly it could have some impacts.

Walter Spracklin: Okay, that's, that's great. Thank you for that.

That may still be missed they'll be fell.

Mark Galardo: And, and the booking curve and I know we asked this question every, every quarter, but. Any additional detail that you can provide on how the next three months is shaping up, I know we're, you know, certainly from number of our consumer and even our, our financial analysis analyst today is talking about the impact that higher interest rates are going to have on Canadians as you renew their mortgages and, and certainly disposable income as a big factor in, in choosing to, to, to purchase air for flights.

Felt when we look forward to 'twenty four and beyond so I think we will provide some color around that as regulations complete and we we pushed through our 2024 plan.

And I remember that we as an airline as well will have an overall.

It will have an overall.

Spend.

Related to all of those kind of issues, including our own goodwill and we'll have to balance between what is regulated and what is actually offered as a goodwill. So we will look to calibrate all of that as we look forward and we understand the regulation.

Okay. That's very helpful. Thank you and then just for my follow up question on the pilots can you just talk about the timing I think the contractors.

Mark Galardo: And so on, and I'm just curious what you're seeing in terms of the booking curve, are you seeing any impact at all on a, on a, on a, on a lower discretionary income by Canadians at all when you look at to that, that, that booking curve. Hi Walter, it's, it's Mark here on, on the booking curve, it's in line with expectations, you know, we see relatively, you know, strong demand for Q4 in almost every single geography that we operate in almost every single segment that we operate in.

Expires tomorrow.

Can you just sort of walk us through the timing of what you expect.

When you expect some type of an agreement I noticed.

That some pilots for picketing over the weekend.

Mr Ahmad informational ticketing.

Right right yes.

Mark Galardo: There is a lot of additional market capacity, so I mean that is one variable, but in terms of demand, you know, it's quite stable in line with expectations. And we're not seeing any, any major slowdown at this point in time, and, and, you know, sort of the diversification of our network gives us a lot of options to move capacity around if we do see a slowdown in one particular geography.

Mike Good morning, Helen.

So the client contract actually expired at the end of September.

Okay.

We.

Mark Galardo: Okay, that's great. Appreciate the color.

And we do provide updates on our website as to ongoing.

Developments on our discussions with with Alpha.

Pilot Union.

So we are in discussions with them at this point in time.

It's difficult for us to comment on timing.

Mark Galardo: Thank you. Our next question comes from Kevin Chang from CIBC. Please go ahead to line is open. Hi, thanks for taking my question. Just maybe turn it back to the fleet expansion plans you have, you are obviously an exciting investment. I guess when you look at the addition, the additional wide bodies, does that require additional regional aircraft or smaller narrow body aircraft investments to improve regional lift or increase regional lift to the max the expanded wide body capacity you have or the regional lift you have today, it's due to you that is insufficient.

On any aspect as you can appreciate.

As we have discussions with them.

Several elements so.

Wish we can provide more and we will provide more.

Yeah.

I wish we could provide more but we will provide more when we have.

With its when we come to an agreement with the pilots.

But again timing is.

Timing is to be determined.

Alright, well, that's a lot of to be determined for me.

For my questions, but thank you marci.

Our next question comes from Kamran Derksen from National Bank Financial. Please go ahead. Your line is open.

Mark Galardo: Hi, Kevin, it's Mark, let me take a, let me take a stab at that. We don't see any for additional regional aircraft at this point in time, you know, we've got quite a sizable order of 820s to come. A lot of those will be deployed into the, you know, into the US where we could leverage additional six freedom opportunities, you know, so we're at this point in time, you know, more regional feed is certainly not in the car.

Yeah. Thanks, Good morning, I guess my first question is really just around I guess.

The growth that you've kind of got planned, especially internationally and especially at your three main hubs I mean, you've kind of refocused the whole operation.

A little more at the big hubs I'm, just wondering if you could maybe discuss.

Mark Galardo: And with the fleet that we've got coming, I think we're pretty sufficient at more color, the 18 dreamliners are replacement. Kevin, I'm sorry, hopefully this is better. And maybe just at a macro level, you know, on the back of Conor's question, you know, you've removed about 3% of your expected capacity this year. I know there's been a bunch of moving parts, but maybe from a competitive perspective, are you seeing that getting backfilled from other airlines?

Some of the infrastructure constraints that you may see in the next few years because there is certainly.

Some of these airports that are pretty stretched not so much from a slot perspective, but really from physical infrastructure. So maybe you can just discuss how that might may or may not be a constraint for you as you as you think about continuing to grow those hubs.

Hi cameras, Mike that's a very interesting.

Interesting area and we're spending a lot of time with our key partners at the airports.

Ensuring that they have enough capacity for us to grow.

In Vancouver, Montreal and Toronto.

And those are very productive discussions that we're having with them.

Mark Galardo: What whether it's within Canada or international carriers that are looking to take advantage of that? Or is the competitive environment pretty stable, even as you've adjusted your capacity through the year here? Yeah, Kevin, the competitive environment is very robust, as you know, right on domestic Canada, we have numerous, you know, competitors, and it's a very competitive market. But for us, you know, we've really focused on, you know, building up our hubs and scale at our hubs, and that's been our focus, and I think that's been pretty good so far.

We are also.

Spending time with the government of Canada to see if we can accelerate some investments in the airport infrastructure to allow us to grow.

We think thats important for the Canadian economy.

We think it's important from a from a passenger perspective honestly to have.

Updated infrastructure.

And so those all those efforts are underway right now.

No.

So it's a little early to tell as to over the next couple of years as to whether the three key three key hubs are going to be able to absorb the capacity that we want to put into the marketplace, especially on the international side.

Mark Galardo: And, you know, competition will continue to evolve, you know, in particular, you know, we've seen some moves, you know, into seasonal markets. But I think overall, you know, we're the strength of our network, you know, the position of our hubs puts in a pretty good position.

But we're certainly comfortable that we're having productive discussions with all the stakeholders to make that happen.

Kevin Chang: Perfect, thank you for taking my questions.

Okay Fair enough and just maybe just a quick follow up for John I. Just I think you mentioned something about the I guess the hedging in Q4.

Kevin Chang: Our next question comes from Matthew Lee from Canacorn Genuity. Please go ahead and line this open. I'm warning all, thanks for taking my question.

I think you said, 45% are you able to provide what the I guess, what the price is at.

Matthew Lee: I wanted to start with demand front. I know you've come, and there's no slowdown overall, but, you know, have you seen any shift in terms of domestic and international, the way that the U.S, carriers have? I know you call that Pacific Atlantic travel, but, you know, do you see a meaningful growth delta in terms of domestic and international, exactly going forward?

We.

I think our full year guide is $1 13 per liter Canadian and I would suggest you that it was.

Was marginally better than than our average rates. So I think we.

We did probably see.

Mark Galardo: Hi, Matthew. It's Mark here. So what we're seeing so far is, you know, we've seen a shift international markets. We've observed the shift for the better part of the last two years, I would say. So there's really nothing materially different. The one thing that we are observing is, you know, there's still a lot more recovery left on the Pacific, and the Pacific market continues to be, you know, sort of like a very good opportunity for us to step in. So we're actually going to be shifting a little bit of capacity in Q4 and Q1 away from the North Atlantic into the Pacific to really season that opportunity.

We did see.

Rates for Canadian fuel per liter in the 100 Twenty's and.

So I think that this was.

Was was well below the range that we've seen spot for most of the quarter. There is some additional disclosure.

In our.

And our financial filing as well, but.

Like I said, I mean, 113 average for the full year and Thats, probably a hedge rate of better than probably a nickel or close to 10 cents better than that.

Okay. Okay. That's helpful. Thanks very much.

Mark Galardo: Okay, then maybe in a similar vein, can we just talk about the demand you're seeing in terms of premium capital versus perhaps standard economy. Yeah, no demand for premium continues to be strong. In fact, it's at pace with prior year. Okay, that's helpful. Thanks.

Our next question comes from Andrew <unk> from Bank of America. Please go ahead. Your line is open.

Hi, Good morning, everyone. John Obviously, you have one four turns of net leverage it's about a half a turn from from a low in 2019 I guess in this interest rate environment. How are you thinking a little bit about capital allocation I guess just in terms of what are the opportunities.

Sally Siss: My next question comes from Sally Siss from Raymond James. Please go ahead.

Sally Siss: Your line is open. Hey, good morning. Just curious on the cargo front. You talked about maybe early signs of things improving, but. But you also kind of changed your fleet strategy on the cargo front. Any kind of revised thoughts as we look at kind of the next one to three years on on how that should progress.

<unk> to keep prepaying debt here and how are you thinking about financing the capex.

Opex over the next couple of years.

Yes. So thanks for the question. So we've been on a steady stream of debt repayment and we'll continue to look at opportunities in terms of.

Continued to dig out the gross debt.

Michael Rousseau: Hi, Sally. It's Mike. I'll start and Mark who will receive cargo will add some color. We haven't changed our strategy. You know, we, we are still committed and excited about growing the freighter business. And we've always, we've always run and will continue to run a very strong belly business. Yeah, we did cancel two triple seven freighters because we just it was a little bit too early for us to take those into our into our network, but we are looking to expand our seven six seven freighter business and and build that business over time.

As an aside we actually.

In this environment actually do quite well with with interest income return on that cash so it's a little bit of a.

A achieve option on liquidity that we do have.

Given the return on our on our deposits almost matches some of our of our fixed rate cost on that.

But we will continue to look at all producer deleverage, we still do have a little bit of.

Of capacity to do so.

As we get into those bigger years of fleet additions 26 in particular.

Michael Rousseau: You know, the market as you know has been soft. It's we believe we've hit the bottom and we're starting to see some early signs of strengthening demand and yield. And we'll take full advantage of that with our with our with both our bellies and and our freighters. And again, the freighters play an important role in providing cargo for our our bellies. And so that's a synergy that we have within our system that that adds value.

The combination of one for sure continue to generate cash from the business and being able to redeploy that to fleet growth is going to be important and then depending on the.

Debt markets and cost of capital will also determine what the best instruments might be for either direct aircraft financing or.

Or any other options.

Might exist.

For most of the 26 acquisitions, but I think we'll have a lot of flexibility in coming into it with.

With.

Michael Rousseau: And on top of that as well. The 77-10 order book of 18 plus 12 options also they have much more efficient cargo space and I believe the additional two pallets that we can add to that. So that compensates somewhat at a much better yield, a much better bottom line than potentially running to triple seven freighters.

Good cash on hand, but also with a great balance sheet will give us access to pretty good pricing I'm sure whatever the environment.

Mark Galardo: I agree that sounds a good plan.

Got it thank you.

And then maybe maybe for Mike Mike The last cycle I think you started buying back stock when your leverage was around these levels certainly sub two times, how do you think about the share buyback here, especially with the stock trading at just about two five times EBITDA.

Mark Galardo: And if I might just on the business demand trends, I wonder if he could say, you know, what you're seeing on a year of year or relative to 2019. No, it's it's actually above 2019 and in particular on the traffic and on the yield side. I talk about business capital like corporate recovery, just to make sure that I. Sorry, corporate recovery. Okay, so corporate recovery, you know, relative to 2019 continues to be in the same range, you know, in the minus 25 to minus 30% range on the on the management side. But we continue to see, you know, sustain recovery in the SME side. And that gives us some interesting yield prospects going forward. That's helpful.

Yes, again as John said, our priority is deleveraging at this point in time.

We will look at other ways of providing.

Sally Siss: Thank you.

Returns to shareholders in due course, but right now our entire focus is on deleveraging.

Okay. Thanks, Mike.

Our next question comes from Stephen Trent from Citi. Please go ahead. Your line is open.

Good morning, everybody can you hear me okay.

Hear you fine.

Thank you and thank you for taking my questions.

Yes.

For me. The first is one of your competitors recently gave some color around.

Tel Aviv flight suspensions.

Chris Murray: Our next question comes from Chris Murray from ATB Capital Markets. Please go ahead and line us up. Yeah, thanks folks. Just going back to maybe the book and curve and looking out into 24 a little bit. I guess a couple questions here. One, you know, how are you, how are you seeing sort of leisure traffic in terms of the curve and I'm just wondering, you know, there was a lot of pent up demand, I think coming into last year.

How it sort of affected.

For Q EPS do you have any high level view with the available seat mile adjustment.

Chris Murray: Are you still seeing kind of echoes of that, that demand is to go into this year or into 24. And how is arrow plan shaping some of that for you as well? So good morning, just on the on the booking side of booking curve on leisure, I mean, again, we continue to pace with comparing ourselves to 2022, 2023. In a prior call, we said some of the leisure demand indicators that were following with demand for, you know, air kind of vacations that continues to be stable, especially when you consider that there's a significantly more market capacity in Q1 of 24% or 23 in that geography.

To what degree this came from may be.

Suspended flights to Tel Aviv, it may be a little bit of a.

A reduction in some some Florida, India or maybe not just curious if.

What may have been the impact there.

Hi, Stephen It's Mark Lee the impact of Tel Aviv is relatively inconsequential I mean, <unk> is an important market for air Canada.

Certainly a very good market share in Canada, but from a full system basis.

About 30 basis points of that is about 30 basis points of capacity.

So it's really inconsequential and.

Close in we've been able to redeploy some of those asm's into productive flying.

And we'll look to get back to Tel Aviv as soon as we know obviously the situation permits us to go back there.

Okay I appreciate that Marc Thank you and just one very quick follow up here.

Chris Murray: And then we're also tracking international leisure demand and we're tracking it not only for Q4Q1, but also for Q2 and Q324. And again, we are at pace or in some cases actually above where we were last year. So we're feeling reasonably, you know, confident that the, you know, the leisure demand indicators continue to be stable. Good morning. Sorry, Chris, there's just a follow-up from Mark Nazer. Hey, Chris, good morning. It's Mark Nazer.

I heard you mentioned I know, it's not a big piece of the pie for you, but I heard you mentioned, Mexico for example that Youre going to start some Monterey flying.

Any indication for Mexico City service to.

To what degree you might be.

Doing any flying to the new airport, there as opposed to if any to juarez.

Regrettably we.

Hershey, Mexico City is a great market for Air Canada, and if there was an opportunity to expand our presence there certainly seize on it.

Chris Murray: I think you were going to ask about the arrow plan side to maybe give some additional color there. So we look at two things in this regard. We compared the behavior of customers that are repeat purchasers on air Canada, that are arrow plan members and are not arrow plan members. And then we also look at for the arrow plan members, those that are engaging with our everyday partners versus those that are not.

However, there are constraints at that airport in terms of slots and availability. So the only option to grow into that new airport or that second airport right. Now that's certainly not in the cards for us at least for the passenger side of the business.

Understood appreciate it thanks, Marc and thanks for taking my questions.

Chris Murray: And in each of those cases, as engagement and the program steps up, Stowe does the frequency of purchase on our Canada and the likelihood to buy tickets directly. So what we're seeing essentially is as an individual as a customer becomes more engaged in arrow plan progressively, they're more likely to have higher volume on our Canada, purchase higher quality tickets, and more likely to purchase those tickets directly versus via third-party distribution sources.

Our last question will come from Jamie Baker from Jpmorgan. Please go ahead. Your line is open hey, good.

Good morning, everybody during the prepared remarks I.

I think it was mark, but you mentioned wide body density and not being wholly dependent on premium demand.

I'm just curious based on your forecasts and ignoring conversion time and conversion expense.

Are you fully satisfied with your density.

Chris Murray: Okay. My other question I just wanted to ask a little bit about the fleet changes. You've talked about the fact that the 787 pens, as come they come in, you're going to be taking out older aircraft. Where exactly would you be pulling down some of those aircraft? Is that going to be kind of the triple sevens or is that older 787s that you'll be taking out? So we haven't yet determined what exactly is going to get potentially pulled out.

I guess another way of asking is whether you might revisit density do you think about it any differently going forward, particularly with the dash tens.

Okay.

Great question and something that we're actually discussing internally right now the beauty of the Dash Dash 10 is they have a lot more real estate to play with.

To look at premium cabin configurations, one way or another.

Chris Murray: So we've got two options. We can reduce our triple seven fleet or we can reduce our 330 fleet or do both. So we're looking at both options as you know our A330 fleet is getting up there in age. Some of our aircraft by the end of the decade will be close to 30 years of vintage. So we're looking at both options right now and seeing which one will almost likely come ahead.

There's a lot of real estate between door, one indoor too on that airplane. So it gives us some very interesting optionality now in terms of our cabin configurations. When we look at the Canadian demographic. When we look at our strategy as you know what all the integration coming to the country.

We feel reasonably good that the level of density that we have right now is appropriate for the market segment out there.

Chris Murray: On the triple seven front, you know, some of the issues that we're having with that fleet in particular is managing some of the seasonality and some of the range issues with that airplane. We're not necessarily concerned about the size of the airplane, more of the range capability. And the A330 is more a question of age. So over the coming, I would say months will determine exactly which way we go. Here. Perfect.

And as we look at the Dash 10, one.

One option could be to look at increasing the premium seed capital.

We'll look at that over the coming months.

Okay helpful. Thanks, and then second I read.

Mike you won't comment directly on how youre thinking about pilot economics, but if.

Chris Murray: But the idea is that you'll be, you know, you'll walk a little bit of growth, but, but that it won't, don't be thinking that, that, that it'll be 100% growth on the 70, 7 times of the comment. Yeah, precisely, and we've, we've got a lot of optionality here. All right, that's great. Thanks, folks.

If we think back to when you first established your 2024 targets how would you describe the market for pilot compensation since that time would you say that the increases you've seen our.

Broadly in line with what you imagine meaningfully ahead meaningfully behind the general consensus in the U S is that.

Helane Becker: And next question comes from Helane Becker from TD Cowan. Please go ahead, Galina's open. Thanks very much operator. Hi, everybody. And thank you for the time. I think, John, you mentioned costs associated with regulatory changes. I'm kind of wondering what you were talking about and what the impact of those costs might be.

Economics have appreciated meaning.

Meaningfully ahead of what was once envisioned but air Canada. It may have.

It had a better forecast in the first place.

Wondering how you would characterize the change.

The pilot market.

Since you established your targets.

John Bert: Sure. So we've seen the duty time for pilots, be one of the stressors that, that we have in our, you know, costs are just kind of evolved a little bit so some changes in Canada here in the last year. And we also have some APPR regulations. Regulation that we are in the process here in Canada of, of completing and finalizing with the transport minister, so in the agency. So in both cases, those would be some additive pressure to our cost structure.

That's an interesting question.

Well, it's a riff on Helane question, so credit where credit is due.

I figured that I figured that out.

We're obviously focused on the Canadian marketplace.

And so.

West jet put together a deal earlier this year that.

That was within.

John Bert: I think in the whole, you know, they'll be, you know, be managed within the overall cost structure, but certainly those would be incremental to the current cost base. Right, but are we talking about a magnitude of hundreds of millions of dollars or tens of millions dollars. Well, I think you know what yet to be determined on the final constitution of what those changes might be, but like I said, you know, I mean hundreds of millions would feel heavy, but certainly it could have some impacts that, you know, may still be, may still be felt when we look forward to 24 and beyond.

Our range of expectations.

So I think as far as we're going to go at this point okay.

Okay interesting. Thank you very much everybody take care.

Thank you.

Have no further questions in queue I would like to turn the call back over to Sally for closing remarks.

Once again, thank you very much for joining us on our third quarter call of 2020 should you have follow up questions. Please contact Investor Relations team massive recall, then who's at La isolates MSA.

Our next one is on <unk>.

I guess, the only contact dee why not something that.

John Bert: So I think we know will provide some color around that as regulations complete and we push to work 2024 plan. You know, remember that we as an airline as well, we'll have an overall, we'll have an overall spend related to to all of those kind of issues, including our own goodwill. And we'll have to balance between what is regulated and what is actually offered as a goodwill. So we'll look to to calibrate all of that as we look forward and we understand the regulation. Okay, that's very helpful.

We have seen benjani.

This concludes today's call. Thank you for your participation you may now disconnect.

[music].

Michael Rousseau: Thank you. And then just for my follow up question on the pilots, can you just talk about the timing? I think the contract is expires tomorrow. But can you just sort of walk us through the timing of what you expect that, you know, when you expect some type of an agreement? I noticed that some pilots were picketing over the weekend. Would they call it informational picketing? Right. Yes. It's Mike. Good morning.

Michael Rousseau: So the contract actually expired at the end of September. We, you know, and we do provide updates on our website as to ongoing developments on our discussions with with alpha, the pilot union. So we are in discussions with them at this point in time. It's difficult for us to comment on timing, on on in the aspect as you can appreciate, as we have discussions with them on several elements. So, I wish we could provide more and we will provide more.

Michael Rousseau: I wish we could provide more but we will provide more when we come to agreement with the pilots. But again, timing is to be determined. Okay. All right. Well, that's a lot of to be determined. For me. For my questions, but thank you, Mercy.

Cameron Dirkson: Our next question comes from Cameron Dirkson from National Bank Financial. Please go ahead. Your line is open. Yeah, thanks. Good morning. I guess my first question is really just around, I guess, you know, the growth that you've kind of got planned, especially internationally and especially at your three main hubs. I mean, you've kind of refocused the whole operation. A little more at the big hubs. I'm just wondering if you can maybe discuss, you know, some of the infrastructure constraints that you may see in the next few years because there are certainly, you know, some of these airports that are pretty stretched, not so much from a slot perspective, but really from physical infrastructure. So if you can just discuss how that might may or may not be a constraint for you as you think about continuing to grow those hubs.

Michael Rousseau: Hi, cameras. Mike. That's a very interesting area. And we're spending a lot of time with our key partners at airports, ensuring that they have enough capacity for us to grow in Vancouver, Montreal and Toronto. And those are very productive discussions that we're having with them. We are also, you know, spending time with the government Canada to see if we can accelerate some investments in the airport infrastructure to allow us to grow.

Michael Rousseau: We think that's important for the Canadian economy. We think it's important from a passenger perspective, obviously, to have updated infrastructure. And so those all those efforts are underway right now. So it's a little early to tell us to over the next couple of years as to whether the three key hubs are three key hubs are going to be able to absorb the capacity that we want to put into the marketplace, especially on the international side. But we're certainly comfortable that we're having productive discussions with all the stakeholders to make that happen.

John Bert: Okay, fair enough. And just a quick follow-up for John. I think you mentioned something about the hedging in Q4. I think you said 45%. Are you able to provide what the price is at? I think our full year guide is 113 cents per liter Canadian. And I would suggest you that it was marginally better than our average rate. So I think, you know, we did probably see rates 14 in fuel per liter in the 120s.

John Bert: And so I think that, you know, this was, was, was well below the range that we've seen spot from most of the quarter. There's some additional disclosure that's in our financial filing as well. But like I said, you know, I mean 113 average for the full year. And that's probably a hedge rate of, you know, better than probably a nickel or close to 10 cents better.

John Bert: Okay, that's helpful, thanks very much.

Andrew Didora: Our next question comes from Andrew Didora from Bank of America. Let's go ahead, your line is open. Hi, good morning everyone. John, you obviously have 1.4 turns of net leverage. It's about a half a turn from from the low in 2019. I guess in this interest rate environment, how are you thinking a little bit about capital allocation? I guess just in terms of, yeah, what are the options? What are the opportunities to keep pre-paying debt here? And how are you thinking about financing your catbacks over the next couple of years?

John Bert: Yeah, so thanks for the question. So we've been on a steady stream here of debt repayment and we'll continue to look at opportunities in terms of, you know, continue to take out the growth debt. As an aside, we actually, in this environment actually do quite well with with interesting come return on. That cash, so it's a little bit of a, of a cheap option on liquidity that we do have given the return on our, on our deposits almost matches some of our, of our fixed rate cost on, on debt.

John Bert: But we will continue to look at opportunity leverage. We still do have a little bit of capacity to do so as we get into those bigger years of fleet additions, 26 in particular. Combination of one for sure continue to generate cash from the business and being able to redeploy that to fleet growth is going to be important. And then depending on, you know, debt markets and cost of capital will also determine what the best instruments might be for either direct our financing or, or any other options that might exist for most of the 26 acquisitions.

John Bert: But I think we'll have a lot of flexibility in coming into it with, with, you know, good cash on hand, but also with what a great balance. She will give us access to pretty good pricing. I'm sure whatever the environment.

Michael Rousseau: Got to thank you and done and maybe, maybe from Mike Mike at a less cycle. I think you started buying back stock when your leverage was around these levels, you know, certainly some two times. You know, how do you think about the share buy back here, especially with the stock trading at just about two and a half times. Thanks. Yeah, I get a chance that our priority is due leveraging at this point in time. You know, we'll look at other ways of providing returns to shareholders in due course, but right now our entire focus is on due leveraging.

Stephen Trent: Okay, thanks Mike. Our next question comes from Stephen Trent from city. Please go ahead. Your line is open. Good morning, everybody. Can you hear me? Okay. You're fine. Okay. Thank you. And thank you for taking my question. Just quickly for me. The first is, you know, one of your competitors recently gave some color around Tel Aviv flight suspensions and, you know, how it sort of affected. For QEPS, do you have any high level view with the available seat and aisle adjustment, you know, to what degree this came from, maybe, you know, suspended flights to Tel Aviv or maybe a little bit of a reduction in some flow to India or maybe not just curious if, you know, what may have been the impact there.

Stephen Trent: Thank you. Hi, Stephen, it's Mark. The impact of Tel Aviv is relatively inconsequential. I mean, Tel Aviv is an important market for Canada, you know, certainly a very good market for Canada, but from a full system basis, it's about 30 basis points of decimal 30 basis points of capacity. So it's really inconsequential and close in, we've been able to redeploy some of those ASMs into productive flying. You know, and we'll look to get back to Tel Aviv as soon as we, you know, obviously the situation permits us to go back there.

Mark Galardo: Okay, appreciate it, Mark. Thank you. And just one very quick follow-up here. I heard you mention, I know it's not a big piece of the part for you, but I heard you mention Mexico, for example, that you're going to start some Monterey flying any indication for Mexico City Service, you know, to what degree you might be doing any flying to the new airport there, as opposed to Venita Morris. Yeah, regrettably, we, you know, firstly Mexico City is a great market for Canada, and if there was an opportunity to expand our presence, there certainly sees on it.

Mark Galardo: You know, and however, there are constraints that are important in terms of slots and availability, so the only option to grow into that, you know, new airport or that second airport, right now that's certainly not in the cards for us, at least for the passenger side of the business. Understood, appreciate that.

Mark Galardo: Thanks, Mark, and thanks for taking my questions.

Jamie Baker: Our last question will come from Jamie Baker from JP Morgan. Please go ahead, your line is open. Hey, good morning, everybody. I'm, during the prepared remarks, I think it was Mark, but you mentioned wide body density and not being wholly dependent on premium demand. You know, I'm just curious, based on your forecast and ignoring conversion time and conversion expense, are you fully satisfied with your density? I guess another way of asking is whether you might revisit density or think about it any differently going forward, particularly with the dash tens.

Mark Galardo: Great question. Somebody that we're actually discussing internally right now, the beauty of the dash ten is that you have a lot more real estate to play with, you know, to look at premium cabin configurations one way or another. You know, there's a lot of real estate between door one and door two on that airplane, so it gives us some very interesting optionality. Now, in terms of our cabin configurations, when we look at the Canadian demographic, when we look at our strategy of, you know, what all the immigration coming to the country, you know, we feel reasonably good at the level of density that we have right now is appropriate for the market segment out there.

Mark Galardo: And as we look at the dash ten, you know, one option could be to look at increasing the premium fee count, but we'll look at that over the coming months. Okay, helpful. Thanks. And then second, you know, and I recognize, you know, Mike, you won't comment directly on how you're thinking about pilot economics, but, you know, if we think back to when you first established your 2024 targets, how would you describe the market for pilot compensation since that time?

Mark Galardo: And would you say that the increases you've seen are, you know, broadly in line with what you imagined, meaningfully ahead, meaningfully behind, I mean, the general consensus in the US is that, you know, economics have appreciated, you know, meaningfully ahead of what was once envisioned, but, you know, our Canada may have, you know, had a better forecast in the first place. So just wondering how you would characterize the change in the pilot market since you established your targets.

Mark Galardo: That's an interesting question. Well, it's a riff on Helane's question, so credit work, credit is due. I figured that out, you know, where I'll see folks on the Canadian Marketplace. And so, you know, WestJet put together a deal earlier this year that was within, you know, our range of expectations.

Michael Rousseau: So, you know, I think as far as we're going to go at this point. Okay. Okay, interesting. Thank you very much, everybody. Take care. Thank you.

Valerie Ducca: We have no further questions in queue. I would like to turn the call back over to Valerie Diffos for closing remarks. Once again, thank you very much for joining us on our third quarter call of 2020. Thank you. You have follow-up questions. Please contact Investor Relations team. Thank you very much for joining us today. We wish you a nice day. If you have any other questions, please do not contact us at the same time. Thank you.

Operator: This concludes today's call. Thank you for your participation.

Operator: You may now disconnect.