Q4 2023 Air Canada Earnings Call

Operator: Good morning, and welcome to Air Canada's fourth quarter and full year 2023 conference call. All participants are in a listen-only mode.

Good morning, and welcome to Air Canada's fourth quarter, and full year 2023 conference call.

All participants are in a listen only mode.

Operator: After the speaker's remarks, there will be 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. I would now like to turn the call over to Valérie Durand, Head of Investor Relations and Corporate Sustainability at Air Canada. Thank you.

After the Speakers' remarks, there will be 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 would 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.

Valerie: Thank you Julianne.

Valérie Durand: Thank you, Julian. Hello, bonjour, et bienvenue à notre quatrième revue trimestrielle de 2023. Welcome and thank you for attending our fourth quarter and year-end call of 2023. Joining us this morning are Michael Russo, our President and CEO, Mark Gallardo, our Executive Vice President of Revenue and Network Planning, and John Deibert, our Executive Vice President and CFO. Other executive team members are with us too this morning. 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. Don will cover our financial performance and guidance before turning it back to Mike.

Valerie: Hello, Basel, if he's going to give him have you seen as P. S. <unk> welcome and thank you for attending our fourth quarter and year end call of 2023, joining us. This morning are Michael Rousseau, our president and CEO, Mark Gallardo, our executive Vice President of revenue.

Valerie: Planning and John <unk>, our executive Vice President and CFO other exactly to those team members are with US This morning.

Michael Rousseau: 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.

Valérie Durand: We will take questions from equity analysts after this call. Today's comments and discussion may contain forward-looking information about Air Canada's outlook, objectives, and strategies that are based on assumptions and subject to risk and uncertainties. Our actual results could differ materially from any stated expectations. Please refer to our forward-looking statement in Air Canada's fourth quarter and full year news release, available on aircanada.com and on CDAR+. And now, I'd like to turn the call over to Mike.

Michael Rousseau: Any questions from equity analysts.

Michael Rousseau: Today's comments and discussion may contain forward looking information about their candidates 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 in there kind of this fourth quarter and full year and he knows it.

Michael Rousseau: Relief available on Air, Canada, Dot com and on SEDAR, plus and now I'd like to turn the call over to Mike.

Mike: Great. Thank you Valerie and good morning, everyone. Thank you for attending this morning's conference call to discuss our fourth quarter and full year 2003 results.

Mike: Great. Thank you, Valerie. And good morning to everyone. Thank you for attending this morning's conference call to discuss our fourth quarter and full year 23 results, which capped a very successful year for Air Canada. I'll see you in a bit.

Mike: Capped a very successful year.

Mike: Got it.

Mike: Let's see.

Mike: We produced strong results in the fourth quarter of 2023, with operating revenue of approximately $5.2 billion, up 11% from the same period in 2022, and Justin Ibada's 521 million was up almost 34% from the previous fourth quarter. We announced record full-year operating revenue of $21.8 billion, up 32% from 2022. Operating income, $23 billion, was nearly $2.3 billion.

We produced strong results for the fourth quarter of 'twenty three with operating revenue of approximately $5 2 billion up 11% from the same period in 2020 to adjust.

Mike: Adjusted EBITDA of $521 million was up almost 34%.

Mike: Fourth quarter.

Mike: We announced record full year operating revenue of $21 8 billion up 32% 20 to operating income.

Mike: It was nearly $2 3 billion, that's a $2 5 billion proving in the previous year.

Mike: That's a $2.5 billion improvement from the previous year. Our adjusted EBITDA was nearly $4 billion, more than twice that of the full year 2022 and is the top end of our guidance that we provided as we printed it last quarter. In addition, our adjusted EBITDA margin of 18.2% was once again among the highest in North America. Our performance on profitability and revenue was complemented by effective cost control that kept our adjusted CASM in range. We have also significantly deleveraged the airline.

Mike: Our adjusted EBITDA was nearly 4 billion more than twice that of the full year 'twenty two.

Mike: At the top end of our guidance that we provided as we predicted last quarter.

Mike: Further our adjusted EBITDA margin of 18, 2% was once again among the highest in North America.

Mike: Our performance on profitability and revenue was complemented by effective cost control kept our adjusted CASM range.

Mike: We also significantly deleverage the airline.

Mike: We remain committed to our promises and acted on our promises, operating against headwinds in our global industry and in the economic and geopolitical environment. We also delivered on key strategic priorities and took important steps to maintain our consistent performance, reaffirming our dedication to our plan. We are strategically adding to our key hubs, enhancing our level of customer service, and improving our operational reliability. In 2023, we saw a meaningful improvement year over year in key operational metrics, despite many uncontrollable issues we had to deal with. Among other strengthening metrics are the flight completion factor and the baggage handling success rate, both of which improved in 2022. Our on-time arrivals rose by nearly 10 percentage points in 2022, and we're above the 2019 levels for the fourth quarter.

Mike: We remain committed enacted on our promises.

Mike: These headwinds in our global industry and in the economic and geopolitical environment.

Mike: We also delivered on key strategic priorities took important steps to maintain our consistent performance reaffirming our dedication to our plan.

Mike: We are strategically adding to our key hubs enhancing our level of customer service and improving our operational reliability.

Mike: In 2023, we saw a meaningful improvement year over year and key operational metrics. Despite many uncontrollable issues, we had to do.

Mike: Among other strengthening metrics are a flight completion factor and baggage handling success rate. Both improved in 2020 twos are on time arrivals rose by nearly 10 percentage points.

Mike: 2022, and we're above in 2019 levels for the fourth quarter.

Mike: We have seen increased customer satisfaction across the entire system, with the most significant areas of improvement being the handling of delays, cancellations, and missed connections. These have been a key area of focus for the organization to ensure that our customers get where they need to go. I thank everyone for their hard work and dedication to service excellence throughout the year and for caring for our customers while safely and comfortably transporting them to their destinations.

Mike: We have seen increased customer satisfaction across the entire system.

Mike: The most significant areas of improvement being the handling of delays cancellations and missed connections.

Mike: These have been a key area of focus for the organization to ensure that our customers get where they need to go.

Speaker Change: I, thank everyone for their hard work and dedication to service excellence throughout the year for caring for our customers, while safely and comfortably transporting them to the destinations.

Mike: I also thank our customers who choose to fly with Air Canada in 2023. We know that our customers, like investors and other stakeholders, highly value consistency and reliability, which are integral to our service access. These are all things we're fully committed to keeping delivering and improving upon. Thank you, Marcy.

Speaker Change: I also thank our customers who choose to fly with air Canada in 2023.

Speaker Change: We know that our customers like investors and other stakeholders highly value consistency and reliability.

Speaker Change: Which are integral to our service excellence.

These are all things we're fully committed to.

Speaker Change: Keep delivering and improving upon 24 and beyond.

Speaker Change: Thank you Marci Mark over to you.

Mark: Mark, over to you. Thanks Mike and good morning everyone. Bonjour tout le monde.

Marci Mark: Thanks, Mike and good morning, everyone.

Marci Mark: Demand.

Mark: Before I begin, I would like to thank our employees for these impressive results. My sincerest thanks and congratulations to all of our employees for an incredible year. I'll start with a quick overview of the fourth quarter. Operating revenues reached $5.2 billion, an 11% increase from the same quarter last year. This increase was driven by 12% higher passenger revenues, mainly stemming from higher traffic and a higher yield on more capacity. International markets, notably the Atlantic and Pacific, performed very well in the quarter and were the main contributors to the year-over-year increase. We hit parity in revenue performance in both premium and economy cabins in the fourth quarter, above 22 levels, and this speaks to the diversification of our cabin configuration strategy. Turning to the full year, we're very pleased with the operating revenue we generated in 2023.

Marci Mark: I've, often lossy shanahan she knows I believe.

Marci Mark: And Krishna.

Marci Mark: My sincere thanks, and congratulations to all of our employees for the incredible year.

I'll start with a quick overview of the fourth quarter operating revenues reached $5 2 billion, an 11% increase from the same quarter last year.

Marci Mark: This increase was driven by 12% higher passenger revenues, mainly stemming from higher traffic and a higher yield on more capacity.

Marci Mark: International markets, notably Atlantic and Pacific performed very well this quarter and were the main contributors to the year over year increase.

Marci Mark: We entirety and revenue performance in both premium and economy cabins in the fourth quarter.

Speaker Change: I would point you to.

Speaker Change: Two levels and this speaks to the diversification of our cabin configuration strategy.

Speaker Change: Turning to the full year, we're very pleased with the operating revenue we generated in 2023.

Mark: We achieved record operating revenues of $21.8 billion, which is 32% higher year-over-year. We saw a 36% growth in passenger revenues, primarily stemming from a strong demand for travel in all markets and a better operating environment, with very strong passenger load factor performance of 86.7% for the year and maintain strong yield. 6% above 2022, even with a 4% increase in our average stage life.

Speaker Change: We achieved record operating revenues of $21 8 billion, which is 32% higher year over year.

Speaker Change: We saw a 36% churn growth in passenger revenues, primarily stemming from our strong domestic travel in all markets and a better operating environment.

We had very strong passenger load factor performance of 86, 7% for the year and maintained strong yields.

Speaker Change: 6% about 2022.

Speaker Change: Even with a 4% increase in our average days late.

Mark: We've built scale at our hubs, we've restored services, and leveraged our partnerships to drive a robust and growing internationally focused airline. We operated on average 1,025 daily flights in 2023 against 945 in 2022. We flew to 188 direct destinations on 6 continents and carried 24% more customers. The performance in 2023 was propelled by our strong, effective network strategy, which delivered solid results on our international network. Passenger revenues from international services increased 50% from 2022, driven by strong demand. To put this in perspective, international services accounted for about 65% of the increase in total passenger revenue.

Speaker Change: We built scale at our hubs, we restored services and leverage our partnerships to drive a robust and growing internationally focused airline.

Speaker Change: We operated on average 1025 daily flights in 2023 against INR 45 and 2022.

Speaker Change: We flew to 188 direct destinations on six continents and carry a 24% of our customers.

Speaker Change: The performance in 2023 was propelled by our strong effective network strategy, which delivered solid results in our international network.

Speaker Change: Passenger revenues from international services increased 50% from 2022 driven.

Speaker Change: Driven by strong demand.

Speaker Change: To put this in perspective international accounts for about 65% of the increase in total passenger revenues.

Mark: This highlights the strength of our network and demonstrates how well we're positioned as Canada's leading global airline. North America also performed very well, with significant increases in passenger revenues, traffic, and capacity. Yields also increased despite the competitive line. It's worth calling out the Domestic Yield Improvement of 3% from 2022 as we leverage both the breadth and depth of our network. Further, the 37% increase in U.S. transborder passenger revenues was supported by new, restored, and increased service and improved connection opportunities with our international network. This ultimately supports our six-region strategy, which we saw continued strength in 2023. I'd also like to call out our strong partnership with United Airlines. We witnessed stronger than anticipated results of our joint business arrangement on Transborder, with added multiple new routes and enhanced services to many medium. 2023 was also a very good year for sun and leisure destinations.

Speaker Change: This highlights the strength of our network and demonstrates how well we're positioned as Canada's leading global airline.

North America also performed very well with significant increases in passenger revenues traffic and capacity.

Yields also increased despite the competitive landscape.

Speaker Change: It's worth calling out to domestic yield improvement of 3% from 22022, as we leveraged both the breadth and depth of our network.

Speaker Change: Further the 37% increase in transported passenger revenues was supported by new restored and increased service and improved connection opportunities with our international network.

Speaker Change: This ultimately supports our sixth freedom strategy in which we saw continued strength in 2023.

Speaker Change: I'd also like to call out our strong partnership with United Airlines.

Speaker Change: We witnessed stronger than anticipated results of our joint venture arrangement on trans border with added multiple new routes and enhanced services to many Canadian cities.

Speaker Change: It's only 22 was also a very good year for Sun and leisure destinations with ground package revenues at Air Canada occasions, driving the 43% increase in other revenues.

Mark: With ground package revenues at Air Canada vacations driving the 43% increase in other revenues. Further, in 2023, revenues from our premium cabins performed well and increased 37% year-over-year. This trend was noted across all markets for both leisure and business customers. Moving to cargo, 2023 revenues declined 27% primarily on lower volume and yield in Allmark.

Speaker Change: Further in 2023 revenues from our premium cabins performed well and increased 37% year over year.

Speaker Change: <unk> was noted across all markets for both leisure and business customers.

Speaker Change: Moving to cargo 2023 revenues declined 27%, primarily on lower volume and yield in all markets.

Mark: Despite 2023 having challenging market conditions, we've taken all the necessary measures to position ourselves to take advantage of the recovery. This includes strategically adjusting our freighter plan so that we can keep focusing on improving overall results for the long term and maximizing cargo network value with our entire fleet. As we eventually receive the 787-10 with larger cargo capacity, taking advantage of global cargo flow through our hubs will become an important lever to further diversify revenues.

Speaker Change: Despite the 2023 had challenging market conditions, we've taken all the necessary measures to position ourselves to take advantage of the recovery.

Speaker Change: This includes strategically adjusting our freedom plan. So that we can keep focusing on improving overall results for the long term and are maximizing cargo network value with our entire fleet.

Speaker Change: As we eventually received 77 dash 10 larger cargo capacity.

Speaker Change: Taking advantage of global cargo flows through our hubs will become an important lever to further diversifying revenue streams.

Mark: We continue to make important market share gains in the global market. Turning to 2024, we expect to increase capacity between 6 and 8% year-over-year. This is reasonable for us as we continue to see industry supply chain pressures and other constraints. We also have one aircraft initially planned in 24 that is moving into 25.

Speaker Change: We continue to make important market share gains in the ballpark.

Speaker Change: Turning to 2024, we expect to increase capacity between six and 8% year over year.

Speaker Change: This is reasonable for us as we continue to see industry supply chain pressures and other constraining factors.

Speaker Change: We also have one aircraft initially planned in 2004 that is moving into 'twenty five.

Mark: We have secured interim capacity to achieve this level of capacity. For Q1, we expect to operate 10% more capacity compared to the same quarter last year. We anticipate market conditions to remain stable, although we do see some pressure on yields and leisure and sun destinations, given the increased capacity in those markets. It is worth noting, however, that Q1 of the previous year was the high watermark for some performance, and it is therefore normal to expect some yield normalization.

Speaker Change: We have secured interim capacity to achieve this level of capacity this year.

Speaker Change: Yeah.

For Q1, we expect to operate 10% more capacity compared to the same quarter last year.

Speaker Change: We anticipate market conditions to remain stable, although we do see some pressure on yields and leisure and sun destinations given the increased capacity in those markets.

Speaker Change: It is worth noting however that Q1 of the previous year was the high watermark for scent performance and is therefore normal to expect some yield normalization.

Mark: Our diversified network will allow us to mitigate most of the discussion. Beyond Q1, we're encouraged by what we see in the forward booking. We see strong demand for international services and our six freedom bookings are already ahead of where we were last year, which, as we recall, was a banner year. Demand for Southern Europe is outpacing 23, and for Q2 and Q3, we responded with additional capacity to Greece, Italy, and Spain. We expect the Pacific to continue to outperform, and we will look to capture this opportunity. Not only are we launching service to Singapore in April, but we're also starting a new seasonal service from Toronto to Osaka Kansai Airport starting this July.

Speaker Change: Our diversified network will allow us to mitigate most of this pressure.

Speaker Change: Beyond Q1, we're encourage with what we see in forward bookings.

Speaker Change: We see strong demand for international services, and our sixth freedom bookings already ahead of where we were last year, which as we recall was about a year.

Speaker Change: Demand for Southern Europe is outpacing 23, and for Q2 and Q3.

Speaker Change: Responded with additional capacity to Greece, Italy, Spain.

We expect a decision to continue to outperform today, we'll look to capture this opportunity.

Speaker Change: Not only are we launching service to Singapore in April we're also starting a new seasonal service from Toronto to Osaka Kansai Airport starting this July.

John: We're very encouraged by the overall performance of our Japan operation. We do anticipate a normalized environment in the domestic market given the competitive landscape. However, we are well positioned to compete, and the overall diversification of our network gives us multiple options to redeploy capacity to other geographies. We continue to have a solid international growth process. The combination of growing demand for international travel to and from Canada, our six freedom potential, and the enhanced scale of our hubs gives us various international expansion opportunities. We look to make the most of these in the years ahead. Thank you. Merci. Over to you, John. Good morning.

Speaker Change: We're very encouraged by the overall performance in our Japan operations.

We do anticipate a normalized environment in the domestic market given the competitive landscape.

Speaker Change: However, we are well positioned to compete in the overall diversification of our network gives us multiple options to redeploy capacity to other geographies.

Speaker Change: We continue to have solid international growth prospects.

Speaker Change: Combination of growing demand for international travel to and from Canada, Our sixth freedom potential and the enhanced scale of our hubs gives us various international expansion opportunities.

Speaker Change: We look to make the most of this in years ahead.

Speaker Change: Thank you Matt over to you John.

Matt: Hey, Mark.

John: Mike provided an overview of our overall financial performance, and Mark discussed our strong passenger revenues. I'll begin with our fourth-quarter operating expenses, which grew 8% to $5.1 billion and tracked to revenue and capacity growth of 11% and 9% respectively. Let me highlight a couple of items that did not naturally track overall increased activity. First, we saw a 21% increase in salaries, wages, and benefits. The increase was driven by a 10% capacity-related FTE growth versus Q4 2022 wage inflation and company-wide profit-sharing accruals, recognizing the strong performance delivered by our employees. Conversely, fuel expenses were 5% lower than Q4 2022 on the basis of 12% jet fuel price declines, partially offset by an increase in fuel liters consumed, related to the ASM growth in the quarter. U4 adjusted EBITDA was $521 million, $132 million, or 34% higher year-over-year, producing a 10.1% adjusted EBITDA margin. Q4 operating income was $79 million, an important reversal from our operating loss of $28 million in Q4 last year.

Speaker Change: Good morning.

John: We provided an overview of our overall financial performance and Mark discussed our strong passenger revenues.

John: Again, with our fourth quarter operating expenses, which grew 8%.

John: $5 1 billion.

And tracked to revenue and capacity growth of 11%.

John: And 9% respectively.

Mark Gallardo: Let me highlight a couple of items that did not naturally track overall increased activity.

Mark Gallardo: First we saw 21% increase in salaries wages and benefits.

Mark Gallardo: The increase was driven by a 10% capacity related FTE growth versus Q4 2022.

Mark Gallardo: <unk> inflation.

Mark Gallardo: Company wide profit sharing accruals recognizing the strong performance delivered by our employees.

Mark Gallardo: Conversely fuel expenses were 5% lower than Q4, 2022 on 12% jet fuel price declines, partially offset by an increase in fuel liters consumed later to the ASM growth in the quarter.

Mark Gallardo: Q4, adjusted EBITDA was $521 million $132 million or <unk>, 34% higher year over year, producing a 10, 1% adjusted EBITDA margin.

Mark Gallardo: Q4, operating income was $79 million an important.

Mark Gallardo: The reversal from our operating loss of $28 million in Q4 of last year.

Turning to the full year.

John: Turning to the full year, we reported $19.6 billion in operating expenses, 17% higher than 2022, on revenue of almost $5.3 billion, or 32%, and a growth of about 20% in operated capacity. Salaries, wages, and benefits increased 21%, reflecting staff additions as we supported the surge in ASM. This also includes accruals for profit-sharing and other wage-related items.

Mark Gallardo: We reported $19 6 billion and operating expenses, 17% higher than 2022 on revenue increase of almost $5 3 billion or 32%.

And a growth of about 20% and operating capacities.

Mark Gallardo: Salaries wages and benefits increased 21%, reflecting staff additions as we supported the surgeon ASX.

This also includes accruals for profit sharing and other wage related items.

Mark Gallardo: For full year 2023 fuel expense remained stable with a 1% year over year increase.

John: For full year 2023, fuel expense remains stable with a 1% year over year increase, reflecting a 14% lower fuel price offset by higher fuel consumption due to significant capacity growth. Overall, our 2023 adjusted CASM of $0.135 was a 2.2% increase over 2022. It's worth highlighting that our 2022 comparison also includes a one-time maintenance cost adjustment representing approximately 150 basis points for non-recurring 2022 favorability. Normalizing for this prior year adjustment would result in a net cost increase of only 70 basis points in 2023. Beyond the higher labor expense and generally inflationary pressures, the increase also reflects the impact of higher load factors experienced in 2023. However, the cost increases were mitigated by yearly efficiency benefits of improved productivity.

Mark Gallardo: Selecting a 14% lower fuel price.

Mark Gallardo: Set by higher fuel consumption.

Mark Gallardo: Significant capacity growth.

Mark Gallardo: Overall, our 2023 adjusted CASM of $13 five.

Mark Gallardo: Was the two 2% increase over 2022.

Mark Gallardo: It's worth highlighting that our 2020 for comparison also includes a one time maintenance cost adjustment, representing approximately 150 basis points, the nonrecurring 2022 favorability.

Mark Gallardo: Normalizing for this prior.

Mark Gallardo: Prior year adjustment would result in a net cost increase of only 70 basis points in 2023.

Behind beyond the higher labor expense and generally inflationary pressures.

Mark Gallardo: Increase also reflects the impact of higher load factors experienced in 2023.

Mark Gallardo: The cost increases were mitigated by the early efficiency benefits of improved productivity.

Mark Gallardo: We do expect to realize additional productivity gains over the next two to three years.

Speaker Change: Let's now turn to free cash flow and liquidity.

Speaker Change: Q4, and full year free cash flows were better than 2022, comparative periods, reaching almost $670 million in Q4.

John: We do expect to realize additional productivity gains over the next two to three years. Let's now turn to free cash flow and liquidity. Q4 and full year free cash flows were better than 2022 comparative periods, reaching almost $670 million in Q4 and nearly $2.8 billion in 2023 full year, including approximately $800 million in free cash flow generated in 2022.

Speaker Change: And nearly $2 8 billion in.

Speaker Change: In 2023 full years.

Speaker Change: Including approximately $800 million free cash flow generated in 2022, we have now surpassed our now withdrawn three year cumulative target of $2 $5 billion even can.

Speaker Change: And before considering 2020 for performance.

Speaker Change: We have put our solid cash generation to good use by aggressively prepaying expensive debt.

Speaker Change: 2022, we retired $473 million U S.

John: We have now surpassed our now withdrawn three-year cumulative target of $2.5 billion even before considering 2024 performance. We have put our solid cash generation to good use by aggressively prepaying expensive debt. In 2022, we retired $473 million U.S. of our $748 million USD convertible senior note.

Speaker Change: Of our $748 million USD convertible senior note.

Speaker Change: In 2023, we prepaid approximately $1 3 billion in <unk>.

Speaker Change: 20, and Boeing 707 related aircraft financing.

Speaker Change: Including the effects of these accelerated debt payments, we have built a total liquidity of $10 $3 billion.

John: In 2023, we prepaid approximately $1.3 billion in A220 and Boeing 787-related aircraft financing. Including the effects of these accelerated debt payments, we have built total liquidity of $10.3 billion and increased our unencumbered asset pool by $6.6 billion at the end of 2023, excluding the value arrows. Our leverage ratio is now solidly back to pre-pandemic levels, ending 2023 at 1.1 times EBIT.

Speaker Change: And increased our unencumbered asset pool, six 6 billion at the end of 2023, excluding the value of aerospace.

Speaker Change: Our leverage ratio is now solidly back to pre pandemic levels.

Speaker Change: <unk> 2023 at one one times EBITDA.

Speaker Change: This is a significant improvement from our leverage ratio of five one December 31, 2022, and it achieves when youre early our now withdrawn post pandemic target levels of sub one five times.

John: This is a significant improvement from our leverage ratio of 5.1 as of December 31st, 2022, and it achieves one-year-early, our now withdrawn, post-pandemic target level of sub-1.5 times. With our strong balance sheet and liquidity levels, we are well-positioned to execute on our scheduled fleet plan addition. This includes 27 A220s delivered between 2024 and 2027, two of which are expected this year, five leased new Boeing 737 MAX 8 for entry into service in 2025, and 30 A321XLR aircraft scheduled for delivery between 2025 and 2029.

Speaker Change: With our strong balance sheet and liquidity levels, we are well positioned to execute on our scheduled fleet plant additions.

Speaker Change: This includes 27, 8% to 20 <unk>.

Speaker Change: Delivered between 2024 and 2027.

Speaker Change: Two of which are expected this year.

Speaker Change: Five leased new Boeing 737, Max eight for entry into service in 2025.

Speaker Change: And 30, <unk> hundred 21, XLR aircraft scheduled for delivery between 2025 and 2000.

Speaker Change: Nine.

Speaker Change: Last month, we took delivery of one more Boeing 787 Dash 930.

Speaker Change: <unk>.

Speaker Change: And final dash nine to be delivered later this year.

Speaker Change: Finally in 2023, we announced an order for $18 77 dash tens that are scheduled to be delivered between 2025 and 2027.

Speaker Change: The order includes options for up to 12 additional 77.

John: Last month we took delivery of one more Boeing 787-9, with the 32nd and final-9 to be delivered later this year. Finally, in 2023, we announced an order for 18787-10s that are scheduled to be delivered between 2025 and 2027. The order includes options for up to 12 additional 787-10s.

Speaker Change: As you can appreciate these commitments and orders must be placed years in advance.

Speaker Change: We plan on acquiring these new aircrafts measured mix of leases and purchases.

Speaker Change: For additional detailed I will refer you to our MD&A, which includes our total committed and projected capital expenditures as well as details on our fleet plan.

John: As you can appreciate, these commitments and orders must be placed years in advance. We plan on acquiring these new aircraft through a measured mix of leases and purchases. For additional details, I will refer you to our MD&A, which includes our total committed and projected capital expenditure, as well as details on our fleet plan. These modern, efficient aircraft will replace some older aircraft and help increase our capacity. Each of these additions has been selected to address strategic opportunities, and they will also present enhancements in fleet economics. Advance our Greenhouse Gas Emissions Reduction Goals, and, most certainly, it was a letter of trust.

Speaker Change: These modern efficient aircraft, replacing some older aircrafts and help increase our capacity.

Speaker Change: Each of these additions has been selected to address strategic opportunities.

They will also present, the enhancements and sweet economics.

Speaker Change: Advance our greenhouse gas emissions reduction goals.

Speaker Change: And most importantly, they will delight our customers.

Speaker Change: Okay now, let's look ahead.

Speaker Change: This morning, we issued guidance for 2020 for replacing all our prior 2024 targets.

Speaker Change: Mark highlighted our capacity growth expectations of 6% to 8%.

John: Okay, now let's look ahead. This morning, we issued guidance for 2024, replacing all our prior 2024 targets. Mark highlighted our capacity growth expectations of six to eight percent.

Speaker Change: Our adjusted CASM is expected to increase between two five and four 5% over 2023.

Speaker Change: This assumes normalized and general inflation across our cost base.

John: Our adjusted chasm is expected to increase between 2.5 and 4.5% over 2023. This assumes normalizing general inflation across our cost base, and we believe that it will be offset by continuing productivity gains across the airline. These productivity gains will gradually occur at many levels.

Speaker Change: And we believe that it will be offset by continuing productivity gains across the airline.

Speaker Change: The productivity gains will gradually occur on many levels.

Speaker Change: To include.

Speaker Change: Your colleagues who've become more experienced.

Speaker Change: The renewal of our fleet.

Speaker Change: And it also includes our maturing technology improvements and our newly modernized processes.

John: They include newer colleagues who have become more experienced, the renewal of our fleet, and it also includes our maturing technology improvements and our continually modernized Roscoe. The entire travel ecosystem, as it works through the final stages of recovery, will also play an important role, notwithstanding these balanced cost conditions. We will also see specific net headwinds to adjusted chasm for the following. First,

Speaker Change: The entire travel ecosystem as it works through the final stages of a recovery will also play an important role.

Speaker Change: Notwithstanding balanced cost conditions.

Speaker Change: We will also see specific headwinds to adjusted CASM for the following.

Speaker Change: First.

Speaker Change: The new agreement with pilots will bring a change in wages and other cost related items.

John: Note that a new agreement with pilots will bring a change in wages and other cost-related items. We have factored our best estimates into our guidance with a view to the Canadian pilot march and our desire to be a leading employer of choice for Canadian pilots. Second, the potential impacts from changes to the regulatory environment for customer disruption.

Speaker Change: We have factored our best estimates into our guidance with a view of Canadian <unk>.

Speaker Change: Pilot market.

Speaker Change: And our desire to be a leading employer of choice for Canadian pilots.

Speaker Change: Second the potential impacts from changes to the regulatory environment for customer disruptions.

John: The timing and eventual incremental costs of new rules will be continually assessed as this file evolves. And finally, the expected increases in airport fees and infrastructure costs as we enter into new agreements. We also are closely watching MRO and supply chain pressures and their potential impact on our maintenance costs and capacity. We believe that we've sized these expected headwinds appropriately, and we have factored them into our guidance with the best information reasonably available. We continue to be laser focused on our margins and on finding opportunities for cost savings. Getting more specific with financial guidance, we are setting 2024 adjusted EBITDA expectations in the range of $3.7 to $4.2 billion. Our earnings guide assumes moderate GDP growth, an average of $1.33 Canadian to U.S. dollar exchange rate, and an average 2024 jet fuel cost of approximately $1 Canadian per liter.

Speaker Change: The timing and eventual incremental cost of new rules will be continue to be assessed as this file evolves.

Speaker Change: And finally from the expected increase in airport fees and infrastructure costs as we enter into new agreements.

Speaker Change: We also are closely watching MRO and supply chain pressures and their potential impact on our maintenance cost and capacity.

Speaker Change: We believe that we've sized these expected headwinds appropriately and we have factored them into our guidance with the best information reasonably available.

Speaker Change: We continue to be laser focused on our margins and are finding opportunities for cost savings.

Speaker Change: Getting more specific with the financial guidance, we are setting 2024, adjusted EBIT expectations in the range of $3 seven and $4 2 billion.

Speaker Change: Our earnings guide assumes moderate GDP growth and average of $1 33 Canadian to U S dollar exchange rate.

Speaker Change: Average 2020 for jet fuel costs of approximately $1 Canadian per leader.

John: Any changes in these underlying assumptions can have a material impact on our guidance during the DeKalb Law Allocation. Our capital allocation strategy will continue to prioritize additional gross debt reduction where it's economically beneficial. We will also continue to fund our fleet plan strategy to grow our network, pursue a modern and efficient fleet, and to prepare the airline for the next decade. With a sound fleet plan and a resilient balance sheet, we will be able to assess more traditional and historical shareholder return programs, although not included in our formal guidance with the information we have available. We are confident that we will be able to continue to generate solid free cash flow in 2024, albeit at lower levels than in 2023 as we take delivery of new aircraft and fund pre-delivery payments on our committed order book. Through deleveraging, conservative management, exceptional assets, and brands, Air Canada has established a bedrock financial foundation to pursue its strategy, and we're very excited for the future. Thank you. Merci beaucoup.

Speaker Change: Any changes in these underlying assumptions can have a material impact on our guidance.

Speaker Change: Turning to capital allocation.

Speaker Change: Our capital allocation strategy will continue to prioritize additional gross debt reduction where it's economically beneficial.

Speaker Change: We will also continue to fund our fleet plan and strategy to grow our network pursue a modern and efficient fleet.

Speaker Change: And to prepare the airline for the next decade.

Speaker Change: With our fleet plan and a resilient balance sheet, we will be able to assess more traditional and historical shareholder return programs.

Speaker Change: While not included in our formal guidance with the information we have available.

Speaker Change: We are confident that we will be able to continue to generate solid free cash flow in 2024.

Speaker Change: Albeit at lower levels than 2023, as we take delivery of new aircraft and fun pre delivery payments on our committed order book.

Speaker Change: Through deleveraging Conservative management exceptional assets and brands Air Canada has established a bedrock financial foundation through pursuant strategy.

Speaker Change: We're very excited for the future.

Speaker Change: Thank you.

Mike: Bye. Thank you, John. As Canada's flag carrier, we embrace Canadian values and project them to the world. Every day, we strive to earn our customers' loyalty. We are proud to have safely carried more than the equivalent of the entire population of Canada during the year. We have also received global recognition. We won SkyTrack awards for the best airline staff in Canada, the best low-cost airline for Air Canada Rouge, and the most family-friendly airline in the world. There were many other awards, too, including for Service, Product, Aeroplan, and Employee Relations. All over,

Speaker Change: Michael.

Speaker Change: Thank you John as Canada Slide carrier, we embrace Canadian values and project them to the world.

Speaker Change: Every day, we strive to earn our customers' loyalty we are proud to have safely carrying more than the equivalent of the entire population in Canada during the year.

Speaker Change: We also received global recognition, we won Skytrax awards for the best airline, Canada Best airline staff in Canada.

Speaker Change: Best low cost airline for Air Canada Rouge.

Speaker Change: And the most family friendly airline in the world.

Speaker Change: There are many other awards to including for service product Aeroplan and employee relations.

Speaker Change: However.

Mike: A financial quarter and a year are finite, discrete measuring periods. They serve as milestones for marking progress, whereas our plans and the investments we are making are geared to the future. A long-term perspective also allows us to see clearly past more immediate temporary headwinds. Among these are economic uncertainty, the evolving regulatory environment, inflation, and supply chain issues. We will manage these conditions, either because they will resolve themselves or because they will simply become part of the environment in which all carriers operate.

Speaker Change: <unk> financial order a year are finite discrete measuring periods service milestones for marketing progress, whereas our plans and our investments we're making are geared for the future.

Speaker Change: A long term perspective also allows us to see clearly pass more immediate temporary headwinds.

Speaker Change: Among these are economic uncertainty the evolving regulatory environment, <unk> and supply chain issues.

Speaker Change: We will manage sheets conditions, either because they will resolve themselves.

Speaker Change: Simply become part of the environment in which all carriers are operating.

Mike: Some factors can at times be more company specific, such as our current negotiations with a pilot group. We are working with Alpha and have agreed upon a framework for continued constructive bargaining through an independent and experienced mediator. This provides stability while we work together over the next few months with the goal of reaching a collective agreement that is beneficial to all stakeholders. This gives our customers certainty and the ability to book with full confidence for the important summer travel period. Our long-term perspective includes a new fleet, to support our network and vision. This includes opening new markets that our current fleet mix cannot cost-effectively service and expanding service to existing markets. Supporting our network growth are our strategic partners. We have longstanding and successful arrangements such as Star Alliance, our A++ joint venture, and other GADs. Our transport alliance with United Airlines allows us to take advantage of six freedom opportunities and participate more fully than any other foreign carrier in the world's largest air transport market.

Speaker Change: Some factors can at times be more company specific such as our current negotiations with our pilot group.

Speaker Change: We are working with Alpha and have agreed upon a framework for continued constructive bargaining through an independent and experienced mediator.

Speaker Change: This provides stability while we worked together over the next few months with the goal to reach a collective agreement that is beneficial to all stakeholders.

Speaker Change: This gives our customers certainty and the ability to book with full confidence for the important summer travel period.

Speaker Change: Our long term perspective includes a new fleet.

Speaker Change: To support our network conditions.

Speaker Change: It includes opening new markets that our current fleet mix cannot cost effectively serve and expanding service to existing markets.

Speaker Change: Supporting our network growth our strategic partnerships.

Speaker Change: We have long standing successful arrangements, such as Star Our alliance, our a plus plus joint venture and other <unk>.

Speaker Change: Our transport aligns with United Airlines allows us to take advantage of sixth freedom opportunities and participate more fully.

Speaker Change: Any other foreign carrier in the worlds largest air transport market.

Speaker Change: So these we have added new agreements such as our partnership with Emirates, which gives us better connectivity with markets in the middle East and South Asia.

Mike: To these, we have added new agreements, such as our partnership with Emirates, which gives us better connectivity with markets in the Middle East and South Asia. Our long-range planning also anticipates a changing competitive landscape with an increasingly crowded domestic marketplace. In this arena, customer experience will be a key competitive advantage.

Speaker Change: Our long range planning also anticipates, a changing competitive landscape with an increasingly crowded domestic marketplace.

Speaker Change: In this arena customer experience will be a key competitive advantage.

Speaker Change: We've always been a leader in product and we will continue to make significant investments in our customers can enjoy such as new and upgraded.

Mike: We've always been a leader in product, and we will continue to make significant investments that our customers can enjoy, such as new and upgraded maple leaf lounges and better in-flight amenities, like new menus and faster Wi-Fi, cabin redesigns, and customer digital. At the same time, we are investing more in customer service training, employee tools, and processes, including for improved accessibility. In 2023, we made significant progress in these areas by delivering on 41 special projects to enhance the customer experience, like our popular mobile app baggage tracking feature. We also released our first multi-year accessibility plan, reaffirming our commitment to enhance accessibility for employees and customers with disabilities. Loyalty and Effective Bolt are product and customer service investments supercharged by AeroPlan. The ability to foster and retain loyalty cannot be overstated. It's been five years since we acquired Air Canada, and it is now Canada's leading travel loyalty program. Not because it is its leading loyalty program or not, as evidenced by the accolades it receives every year.

Speaker Change: These lounges and better in flight amenities, like new menus, and faster Wi Fi Abbott Redesigns and customer digital digital tools.

At the same time, we are investing more in customer service training employee tools and processes, including firm improved accessibility.

Speaker Change: In 2023, we made significant progress in these areas by delivering on 41 special projects to enhance the customer experience like our popular mobile app baggage tracking feature.

Speaker Change: We also released our first multiyear accessibility plant reaffirming our commitment to enhance accessibility for employees and customers with disabilities.

Speaker Change: Loyalty effect of both our product and customer service investments supercharged by Aeroplan.

Speaker Change: The ability to foster and retain loyalty simply cannot be overstated.

Speaker Change: It's been five years since we acquired Irwin.

Speaker Change: Now Canada's leading travel loyalty program, not as leading loyalty program bar none.

<unk> by the accolades we receive every year.

Speaker Change: Aeroplan has grown to more than 8 million members doubled since the acquisition.

Speaker Change: Gross billings of redemptions have each increased by about 70%.

Speaker Change: In Aero plans financial contribution has outpaced out levels.

Speaker Change: We're excited by the many additional opportunities available as the program continues to reach New records.

Mike: Aeroplane has grown to more than 8 million members, double since the acquisition. Gross bailings and redemptions have each increased by about 70%, and Aeroplan's financial contribution has outpaced that level. We're excited by the many additional opportunities available as the program continues to reach new records. Throughout 2023, we will remain deeply committed to the communities we serve, as evidenced by our very active and relevant engagement program. The Air Canada Foundation grants to charities as possible transportation programs, supported in part by point donations from aeroplan members, and our scholarship programs are vital to the communities we serve. At the grassroots level, we sponsored and celebrated cultural and local events through more than 265 partnerships across the country in 2023.

Speaker Change: Throughout 2023, we remain deeply committed to the communities, we serve as evidenced by our very active and relevant engagement programs.

Speaker Change: The Air Canada Foundation grants to charities as hospital Transportation program supported in part by part and part by point donations from Aeroplan members and our scholarship programs are vital to the communities we serve.

The grassroots level, we sponsored and celebrated cultural local events through more than 265 partnerships across the country in 2023.

Speaker Change: Often this is overlooked.

Speaker Change: We are very proud of and committed to get back.

Speaker Change: We also demonstrated good citizens are shipped through our environmental programs, reducing our carbon footprint is a high priority for our customers and for us.

Speaker Change: With respect to SaaS, we continue to emphasize the critical importance of partnerships with industry and government.

Speaker Change: For this reason we are pleased with the recent announcement of a new combined total investment of $6 2 million to support the future of SaaS and Manitoba in partnership with the Canadian infrastructure Bank and the province of Manitoba.

Mike: Often, this is overlooked. We are very proud and committed to giving back. We also demonstrate good citizenship through our environmental programs.

Mike: Reducing our carbon footprint is a high priority for our customers and for us. With respect to SAF, we continue to emphasize the critical importance of partnerships with industry and government. For this reason, we were pleased with the recent announcement of a new combined federal investment of $6.2 million to support the future of SAF in Manitoba in partnership with the Canadian Infrastructure Bank and the province of Manitoba. However, so much, much more needs to be done. Taken together, all these items, our strong foundation, our results, our ability to execute a value-creating strategy, and our continual participation in the daily lives of Canadians, speak to Air Canada's longstanding and positive presence across our country and assure all stakeholders that they can rely on us to be there and deliver on our commitments far into the future. With that, I'm now pleased to take questions. Thank you, Mike, and thank you all for joining us this morning.

Speaker Change: But much much more needs to be done.

Speaker Change: Taken together all of these items are strong foundation, our results our ability to execute a value creating strategy and our continual participation in daily lives Canadians speaks to air Canada's longstanding positive presence across our country.

Speaker Change: And assures all stakeholders that they can rely on us to be there and deliver on our commitments far into the future.

Speaker Change: With that now pleased to take questions.

Speaker Change: Thanks, Mike.

Speaker Change: And thank you all for joining us this morning, but I missed on that topic that has some ethane. We're now ready to take your questions should you require further details. Following this call our investor Relations team is available for support <unk> use in yet.

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

Speaker Change: The interest of time, we ask that you. Please limit yourself to one question and a brief follow up. Thank you. Our first question comes from Kevin Chiang from CIBC. Please go ahead. Your line is open.

Kevin Chiang: Hi, Thanks for taking my question good morning, everybody.

Kevin Chiang: Maybe this is for John just on the adjusted CASM. Thank you for all the details there but.

Operator: We are now ready to take your questions. Should you require further details following this call, our Investor Relations team is available for support. Back to you, Julianne. Thank you. As a reminder, to ask a question, please press star followed by the number one on your telephone keypad.

Kevin Chiang: Like I said I think further out it feels like some of the pressures in 2020 for Mike.

Kevin Chiang: Might have an outsized impact on adjusted CASM.

John: So when you look further out like what do you think you can get get to negative adjusted CASM growth is that a 2025 store when you lap some of these issues or.

Kevin Chiang: In the interest of time, we ask that you please limit yourself to one question and a brief follow-up. Thank you. Our first question comes from Kevin Chiang from CIBC. Please go ahead.

John: Or is visibility there are still a little bit challenged.

Speaker Change: Yes, it's a fair question I think calling.

Speaker Change: Calling 25, CASM, maybe a bit early but I do think and I had it in the commentary.

Kevin Chiang: Your line is open. Hi, thanks for taking my question. Good morning, everybody.

Speaker Change: Structurally we do believe that there's productivity and probably to be felt over the next couple of years.

John: Maybe this is for John, just on the adjusted chasm. Thank you for all the details there. But I guess if I think further out, it feels like some of the pressures in 2024 might have an outsized impact on adjusted chasm growth. So when you look further out, when do you think you can get to negative adjusted chasm growth? Is that a 2025 story when you look at some of these issues? Or is visibility there still a little bit?

Speaker Change: And if you combine that with the fact that we do expect to continue to grow.

Speaker Change: Capacity.

Speaker Change: I think we would expect.

Kind of a transitional period here right, we have a lot of volatility over the last few years and brought the airline back to fairly.

Speaker Change: Complete capacity levels.

Speaker Change: And now we are facing some of these kind of transitioning adjustments I would call them lagging inflation in fact.

John: Yeah, it's a fair question. I think, you know, calling 25 CASM now may be a bit early, but I do think, and I added in the commentary that structurally, we do believe that there will be productivity probably to be felt over the next couple of years. And if you combine that with the fact that we do expect to continue to grow capacity, I think we would expect kind of a transitional period here, right? We had a lot of volatility over the last few years and brought the airline back to, you know, fairly complete capacity levels. And now we are facing some of these kind of transitionary adjustments, and I would call them lagging inflation. In fact, there are a couple of items that I did mention.

Speaker Change: A couple of items that did mention and so as we get into 'twenty five 'twenty six I didn't think that we will have a <unk>.

Speaker Change: Better balanced picture and that will give us an opportunity to really experience some of the productivity gains.

Speaker Change: That makes a ton of sense.

Speaker Change: Maybe just a clarification question, Mike Mike you mentioned the strength of Aeroplan.

Speaker Change: The increase in gross billings that redemptions by 70% I think you also said the Aeroplan contribution bolus is tracking above this just.

Speaker Change: When you're defining contributions that are earnings comment or is that another kpis.

Speaker Change: That youll referencing.

Speaker Change: Hi.

Speaker Change: Good.

Speaker Change: Yeah. Good morning. So this is compared to 2019 and its earnings.

Speaker Change: Earnings Okay perfect.

Speaker Change: That's great. Thank you very much and best of luck in 2000.

Speaker Change: Our next question comes from Kamran Dukson from National Bank Financial. Please go ahead. Your line is open.

John: And so as we get into, you know, 25, 26, I do think that we will have a better balance, and that'll give us an opportunity to really experience some of the productivity gains. That makes a ton of sense. And maybe just a clarification question. You know, Mike, Mike, you mentioned the strength of our plan, the increase in gross buildings and redemption by 70%. I think you also said the AeroPlan contribution bill is tracking above this. Just, when you're defining contributions, is that an earnings comment or is that another KPI that you're referencing? Thank you. Thank you. Thank you. Yeah, good morning.

Kamran Dukson: Yeah. Thanks, very much good morning, I guess I wanted to ask about the cost of being a little bit different way I mean, it does seem that.

Kamran Dukson: Most of these cost inflation that you're seeing is really an industry wide issue.

Kamran Dukson: Potentially even argue that the <unk>.

Kamran Dukson: Millet wage inflation inflation or just general wage inflation is also an industry trend and I'm. Just wondering if you could maybe comment a little bit about.

Kamran Dukson: What youre thinking costs inflation that you're seeing in 2024 might actually be unique to air Canada or is it really just across the board pretty much an industry cost deflation issue.

Speaker Change: Yes. Thanks for the question Cameron I think really.

Speaker Change: And it was very.

John: So this is compared to 2019 and its earnings. Earnings. Okay, perfect. That's, that's great. Thank you very much.

Speaker Change: Yes.

Speaker Change: Purposeful in the commentary that.

Speaker Change: I think generally speaking we're seeing.

Speaker Change: Good.

Speaker Change: <unk> and productivity gains as we kind of restored.

Kevin Chiang: Best of luck. Our next question comes from Cameron Dirksen from National Bank Financial. Please go ahead, your line is open. Yeah, thanks very much. Good morning.

Speaker Change: Some.

Speaker Change: Some some fluidity in the system here, but also take advantage of capacity as it continues to grow.

Speaker Change: So for the airline itself I don't see any.

Cameron Dirksen: I guess I want to ask about the cost maybe in a little bit different way. I mean, it does seem that most of the cost inflation that you're seeing is really an industry-wide issue. One would potentially even argue that the pilot wage inflation or just general wage inflation is also an industry trend. I'm just wondering if you could maybe comment a little bit about what you think the cost inflation that you're seeing in 2024 might actually be unique to Air Canada, or is it really just across the board, pretty much an industry cost inflation?

Speaker Change: Unique items.

Speaker Change: Zinc.

Okay.

Speaker Change: The ones that we did mention our one sentence.

The industry will deal with them.

Speaker Change: To some degree I think.

Speaker Change: <unk>.

Particularly on airports and so on and so forth and they will also enable growth so.

Speaker Change: There is a cost element to them.

Speaker Change: Yes.

Speaker Change: That's also helpful detail.

Speaker Change: To restore their own capital investment programs as such.

Speaker Change: Okay.

Okay. That's helpful and just on that they get the capacity you mentioned that you're still seeing some constraints in 2024.

John: Yeah, thanks for the question, Cameron. I think really, and it was very, I guess, purposeful in the commentary that, I think, generally speaking, we're seeing good efficiency and productivity gains as we kind of restore some, you know, some, some fluidity in the system here but also take advantage of capacity as it continues to grow. So, for the airline itself, I don't see any, you know, unique items.

Speaker Change: I think it maybe you guys to grow it's a little lower than what you initially thought a year or so ago. When do you think you can get back to kind of pre pandemic levels of capacity is that something you could see in 2025 or maybe it actually takes a little longer.

Speaker Change: Hi, Kevin its market as we get to the end of Q4 end of this.

Mark Gallardo: This year and as we go into 2005 with the lead delivery skyline that we've got we're going to exceed 2018 capacity levels.

John: I think the ones that we did mention are ones that, as an industry, we'll deal with. To some degree, I think, you know, the airports and so on and so forth, they also enable growth. So, you know, there is a cost element to that. But for us, that's also helpful to that. They continue to restore their own capital investment programs.

Speaker Change: Okay. That's great I appreciate the time, thanks very much.

Speaker Change: Sure.

Speaker Change: Our next question comes from <unk> Gupta from Scotiabank. Please go ahead. Your line is open.

Gupta: Thanks, operator, good morning, everyone.

Gupta: Just wanted to go back to.

Gupta: Due to your EBITDA guidance for the full year I understand there are lot of CASM, one offset an idiosyncratic factors this year.

Mark: Okay, that's helpful. And just on capacity, you mentioned that you're still seeing some constraints in 2024. You know, I think maybe your capacity growth is a little lower than what you maybe initially thought a year or so ago. When do you think you can get back to kind of pre-pandemic levels of capacity? Is that something you could see in 2025? Or maybe it actually takes a little longer?

Gupta: My math suggests.

Gupta: Zooming slightly positive yield and RASM this year and margins probably flat to down.

Gupta: It doesn't make sense in light of the competitive environment are you seeing a lot of spend in the RASM some yield heading into 'twenty four.

Speaker Change: Hi, Hunter it gets market.

Speaker Change: As we model specifically 2020 forward, we're not projecting to have yields that are above last year.

Cameron Dirksen: Hi Cameron, it's Mark. As we get to the end of Q4 of this year and as we go into 2025 with the fleet delivery skyline that we've got, we're going to exceed 2019 capacity. Okay, that's great. Appreciate the time. Thanks very much.

Speaker Change: There is our unit revenue and how we get to the EBITDA formulation here. So.

Speaker Change: The yield and RASM projections that we have built into your EBITDA guidance actually factor in the competitive dynamic that we're in.

Speaker Change: That's all accounted for.

Speaker Change: I assume makes sense. Thank you and then if I can just touch base on CASM John maybe.

Konar Gupta: Our next question comes from Konar Gupta from Scotiabank. Please go ahead; your line is open. Thanks, operator. Good morning, everyone.

I think you have got pilot site maintenance.

Mark: I just want to kind of go back to your EBITDA guidance for the full year. I understand there are a lot of chasms, one-offs, and idiosyncratic factors this year. But my math suggests that you are assuming slightly positive yield and ransom this year and margins probably flat to down. Does that make sense in light of the competitive environment? I mean, where are you seeing a lot of strength in the ransoms and yield heading into twenty four? Hi Conor, it's Mark.

Speaker Change: Capacity is also not to the Martha maybe that also adds to some CASM because of that.

The nominal effect.

Speaker Change: Is there anything unique.

Speaker Change: Our assessment at this time listeners last few months or so.

Speaker Change: That has changed your kind of view on the CASM, meaning like I said inflation, that's getting bigger generally across your system or LSA any other updates from regulatory environment side of things.

Speaker Change: Yes sure. Thanks for the question I think you had something in your kind of your preamble to the question which is.

Mark: As we model specifically 2024, we're not projecting yields that are above last year, and neither is our unit revenue, and how we get to the EBITDA formulation here. So the yield and RASM projections that we have built into EBITDA guidance actually factor in the competitive dynamic that we're experiencing. So that's all the counting for me. I see, Mikhail, thank you. And then, if I can just touch base on CHASM, John, maybe, you know, like, I think you have got, you know, pilots, you've got maintenance. I think capacity is also not up to the mark, right? Maybe that it also kind of adds to some CHASM because of the denominator effect.

Speaker Change: As we look over the last three months, yet there's been a bit more pressure on capacity and I think some of that.

Speaker Change: You are well aware of just in terms of.

Speaker Change: For example, GTS issues in <unk>.

Speaker Change: Mark mentioned.

Speaker Change: It's an aircraft or two that slipped out of the schedules and into 25. So.

Speaker Change: I mean, I would say that that is via the context that we're operating in which is.

Speaker Change: As we bring on capacity there is some still have challenges in being able to bring all of it that wed like from a.

Speaker Change: Aircraft point of view so.

Speaker Change: Lightened, our expectation a little bit on capacity.

John: Is there anything unique in your assessment this time versus, you know, the last few months or so that has changed your kind of view on the CHASM? Meaning, like, is inflation that's getting bigger generally across your system, or are there any other updates from the regulatory environment side of things? Yeah, so thanks for the question. I think you hit on something in your kind of preamble to the question, which is, you know, as we looked over the last three months, yeah, there's been a bit more pressure on capacity. And I think, you know, some of that you're well aware of just in terms of, for example, GTF issues. And Mark mentioned that, you know, an aircraft or two that slips out of the schedules into 25.

Speaker Change: Does have a little bit of an impact.

Speaker Change: I would say just on cost absorption, but again nothing meaningful relative to 20 other items or changes on how we view the environment.

Speaker Change: These were things that we had started to discuss in the middle of the year last year as being the items that we were tracking and working to manage and mitigate.

Speaker Change: I appreciate the time thank you.

Speaker Change: Our next question comes from Walter Spackman from RBC Capital markets. Please go ahead. Your line is open yes, thanks very much operator, good morning, everyone. So so only.

Walter Spracklin: CASM Guide you mentioned that it does include a labor deal assumption is there any way you can frame I know, it's tough but is that.

John: So it's, you know, I would say that that is the context that we're operating in, which is, as we bring on capacity, there are some still challenges in being able to bring all of it that we'd like from an aircraft point of view. So that has, you know, lightened our expectation a little bit on capacity. And that does have a little bit of an impact, I would say just on cost absorption, but again, nothing meaningful, relative to any other items or changes in how we view the environment. These were things that we had started to discuss in the middle of the year last year as being things that we were tracking and working to manage and mitigate. I appreciate your time; thank you.

Walter Spracklin: Is that.

Walter Spracklin: Over 8% per year or is it less than any any indication that you can give so that we can assess the level of conservatism or that you've built into your labor deal assumption that drove your two five to four 5% CASM.

Walter Spracklin: Good morning Walter.

Walter: No I can't provide any additional comments.

Walter: But we we've assessed this and that.

Speaker Change: My commentary, we do expect that we are.

Speaker Change: Im going to continue to be.

Speaker Change: And be the best career opportunity for Canadian pilots and I think that's the way we're looking at.

Walter Spracklin: Our next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead, your line is open. Yeah, thanks very much, Operator. Good morning, everyone.

Speaker Change: Overall expectation for Boston, So you have.

Speaker Change: This view and of course this will evolve over the year and also that if something does come up meaningful.

Speaker Change: Okay, no understood that are completely understood that kind of a sensitivity for sure.

John: So on the CASM guide, you mentioned that it does include a labor deal assumption. Is there any way you can frame – I know it's tough, but is that over 8% per year? Is it less than 8%? Any indication that you can give so that we can assess the level of conservatism that you've built into your labor deal assumption that drove your 2.5% to 4.5% CASM? Good morning, Walter.

Speaker Change: Perhaps moving to free cash flow.

Speaker Change: You did mention that Youre not youre not you don't have a guide out there any longer.

Speaker Change: And I think you said that 2024 would be strong but less than <unk>.

Speaker Change: And then 2023.

Okay.

Speaker Change: Is that is that half of 'twenty three as you know it.

Any color there but.

Speaker Change: Then if you look out over the timeframe of the next few years kind of the way you did it in the past few years on accumulative basis, you do have a fairly significant Capex program is there should we expect a.

John: No, I can't provide any additional comments, but we've assessed this, and I put in my comments here that we do expect that we are going to continue to be the best career opportunity for Canadian pilots. And I think that's, you know, the way we're looking at our overall expectation for cost. And so you have a view, and of course, this will evolve over the year, and we'll keep you posted if something does come up. I completely understand that kind of sensitivity, for sure.

Speaker Change: Meaningfully lower free cash flow trend over the next three versus last three given the capex is that the right way to look at it.

Speaker Change: Okay.

Speaker Change: Okay. Those are two good questions and maybe some of that is going to be a better discussion for kind of a more wholesome.

John: Perhaps moving to free cash flow, you did mention that you don't have a guide out there anymore, and I think you said that 2024 would be strong but less than 2023. Is that half of 2023? Do you see any color there? And then if you look out over the timeframe of the next few years, kind of the way you did it in the past few years on a cumulative basis, you do have a fairly significant CapEx program. Is there, should we expect a meaningfully lower free cash flow trend over the next three versus the last three given the CapEx, is that the right way to look at it? Okay, those are two good questions, and maybe some of that is going to be a better discussion for, you know, kind of a more wholesome investor discussion as we look through the year and find the right time to think and talk long-term with the investor group. But what I would say is that just on your first comment, and maybe I'll add some color to the second.

Speaker Change: Investor discussion.

Speaker Change: Through the year and find the right time that they can talk long term with the Investor group, but what I would say is that just on your first comment and then maybe I'll add some color to the second.

Speaker Change: In simple terms.

Speaker Change: EBITDA has been a good proxy for cash from operations for us. So we do have.

Speaker Change: Against that.

Speaker Change: Think about interest costs, so we attract a pretty.

Speaker Change: Pretty good conversion is I guess my point and if you look at.

Speaker Change: The disclosure we do provide.

Speaker Change: A pretty good number for <unk>.

Speaker Change: Projected Capex I think in this last this quarter is around $2 7 billion for the year. So you can do a little bit of your own math there right. If you do a little bit of a.

Speaker Change: Haircut on EBITDA or things like interest cash and we don't pay any taxes, rather at this point in time.

Speaker Change: Our losses from prior periods are still being absorbed.

Speaker Change: It absorbs our tax burden.

Speaker Change: And that gives you a pretty good place the land or for a cash number and that will move around a little bit of working capital in advance ticket sales those kind of things but.

John: In simple terms, EBITDA has been a good proxy for cash from operations for us that we do have, you know, against that, you would think about interest costs. And so we have tracked a pretty good conversion is, I guess, my point. And if you look at the disclosure, we do provide a pretty good number for projected capex, I think, in this last disclosure, so around $2.7 billion for the year. So you can do a little bit of your own math there, right? If you do a little bit of a haircut on EBITDA, or things like interest cash, and we don't pay any taxes, really, at this point in time, our losses from prior periods are still being absorbed, so that it absorbs our tax burden.

Speaker Change: I don't expect.

Speaker Change: Another $2 8 billion free cash flow year in 2024, that's for sure, but I think it's going to be solid cash generation and then from that point on I think that the airline has the capacity to continue to generate cash flows on a consistent basis.

Speaker Change: Like I said, we'll talk 25, 26, and further out years, perhaps on a whole on a more wholesome discussion, but I would say that.

Speaker Change: We have the opportunity to do many different things with the aircrafts that are coming into into the fleet over the next three or four years that.

Speaker Change: That will allow us to have the right balance of cash generated as well.

John: And that gives you a pretty good, you know, place to land for a cash number. And that'll move around a little bit, you know, working capital and advanced ticket sales, those kind of things. But, you know, I don't expect another $2.8 billion free cash flow year in 2020 for it, that's for sure. But I think it's going to be solid cash generation. And then from that point on, I think that the airline has the capacity to continue to generate cash flows on a consistent basis. Like I said, we'll talk about 25, 26 and further out years, perhaps in a more wholesome discussion.

Speaker Change: Perfect I appreciate the time Josh.

Josh: Thank you.

Josh: Our next question comes from Andrew Dora from Bank of America. Please go ahead. Your line is open.

Andrew George Didora: Hi, good morning, everyone.

Andrew George Didora: Mark in your prepared remarks, you seemed a bit more obviously more constructive on international over domestic this year just.

Andrew George Didora: Just curious in the 6% to 8% capacity outlook. How is how are you thinking about balancing that between domestic and international as domestic growth going to be.

Andrew George Didora: Below international given your thoughts there just curious how youre thinking about that.

Mark Gallardo: Sure. Good morning. Good question, certainly international is going to outpace domestic growth we're going to have.

Mark Gallardo: Pretty flat domestic growth this year.

Speaker Change: 2024, and we are going to be focusing a lot more on international and in particular.

Andrew George Didora: But I would say that we have the opportunity to do many different things with the aircraft that are coming into the fleet over the next three, four years that'll allow us to have the right balance of cash generated as well. Perfect. I appreciate the time, John. Thank you. Our next question comes from Andrew Didora from Bank of America. Please go ahead, your line is open.

Speaker Change: Pacific This year.

Speaker Change: <unk> seen.

Speaker Change: There's still a bit of a recovery on that the settlement, we still think there's some good opportunities there.

Speaker Change: International growth will really be focused in 'twenty four.

Speaker Change: Got it thank you.

Speaker Change: John just your comments on capital allocation seemed seem very balanced.

Speaker Change: You mentioned kind of continuing to lower gross debt.

Mark: Mark, in your prepared remarks, you seemed a bit more, obviously more constructive on international over domestic this year. Just curious, in the six to eight percent capacity outlook, how are you thinking about balancing that between domestic and international? Is domestic growth going to be below international, given your thoughts there?

Speaker Change: How much is sort of expensive debt that's <unk>.

Speaker Change: <unk> to be that is pre payable here and how can you help provide a number on kind of what maybe a gross debt target might look like thank you.

Speaker Change: Yes, that's fair fair questions.

Speaker Change: Not sure that there is an absolute target I think that.

Mark: Just curious how you're thinking about that. Sure. Good morning.

Speaker Change: Just generally speaking.

Speaker Change: Markets have improved they're quite a bit spreads have tightened up so that does make the pay down of debt potentially are.

Mark: Good question. Certainly, international growth is going to outpace domestic growth; we're going to have pretty flat domestic growth this year and in 2024, and we're going to be focusing a lot more on international and, in particular, the Pacific this year. Because we're still in the middle of a recovery in the Pacific, and we still think there are some good opportunities there. So, you know, international growth will really be the focus in 20

Speaker Change: We have an ability to reprice, our term loans and things like this so I think those are areas that are opportunities for us is really just mentioned.

Speaker Change: Our debt cost more efficient.

Speaker Change: We manage very well through a period, where liquidity was very important to us and we're coming into a period now where we feel more confident about our ability to generate cash flows on a more consistent basis and with that I think.

John: And John, just, you know, your comments on capital allocation seemed very balanced. You mentioned kind of continuing to lower gross debt. You know, how much of the sort of expensive debt that continues to be, you know, that is prepayable here? And how, you know, can you help provide a number on kind of what maybe a gross debt target might look like? Thank you.

Speaker Change: No specific target, but we will take advantage of opportunities.

Speaker Change: Think that in 2000 and for that still remains I would say high up on the list of deploy.

Speaker Change: Deployment opportunities.

Speaker Change: And we'll go from there but.

Speaker Change: We have a kind of a balanced nice.

John: Yeah, fair question. I'm not sure that there's an absolute target. I think that, just generally speaking, you know, the capital markets have improved here quite a bit and spreads have tightened up. So that does make the paydown of debt potentially easier, or we have the ability to reprice our term loans and things like this. So I think those are areas that are opportunities for us, really just making our debt cost more efficient. And we've managed very well through a period where liquidity was very important to us.

Speaker Change: <unk> now where we also have.

Speaker Change: Ramp up to do some capex and so there'll be some where to deploy that cash effectively and then as we said in our comments there will always be opportunities here for us to look.

Speaker Change: Forward here at shareholder participation.

Speaker Change: Great. Thank you.

Speaker Change: Our next question comes from Saudi Cameroon from BMO. Please go ahead. Your line is open.

Saudi Cameroon: Yes. Good morning, Thank you.

Saudi Cameroon: Maybe one quick clarification does the Q4.

John: And we're coming into a period now where we feel more confident about our ability to generate cash flows on a more consistent basis. And with that, I think, you know, no specific target, but we will take advantage of opportunities. And I think that, in 24, that still remains, I'd say, high up on the list of deployment opportunities.

Saudi Cameroon: CASM labor CASM incorporate any.

Saudi Cameroon: Core pilot.

Saudi Cameroon: Kind of deal assumption, but.

Saudi Cameroon: My main question is maybe just picking up on your last comment John.

Saudi Cameroon: Given where the balance sheet is.

Saudi Cameroon: <unk> overall financial profile.

Saudi Cameroon: And I appreciate you have some heavy capital investments over the next two three years, but when windows.

John: And, you know, we'll go from there. But we have a kind of balanced, nice spot now where we also have a ramp up to some CapEx. And so there'll be somewhere to deploy that cash effectively. And then, as we said in our comments, there'll always be opportunities for us to look forward to shareholder participation. Great, thank you. Our next question comes from Fadi Chamoun from BMO. Please go ahead, your line is open. Yeah, good morning.

Saudi Cameroon: Some form of distributions to shareholders entered in the framework.

Saudi Cameroon: So ill.

Speaker Change: So I'll take the first one first and then the second one that just need to use.

Speaker Change: Some color on that but.

Speaker Change: Yeah.

Speaker Change: Q4 numbers as reported to have the same thinking.

Speaker Change: Respect to too.

Speaker Change: <unk>.

Speaker Change: The upcoming contract.

Speaker Change: Built into its in other words.

Fadi Chamoun: Thank you. Maybe one quick clarification. Does the Q4, Hasim Labor, and Chasm incorporate any approval for a pilot, a kind of deal of assumption? But my main question is maybe just picking up on your last comment, John. Given where the balance sheet is, and your overall financial kind of profile, and I appreciate you have some heavy capital investment in the next two to three years, but when does some form of distribution to shareholders enter the frame? So I'll take the first one first and then the second one.

Speaker Change: We've assumed debt from the expiry date.

Speaker Change: Accruals for for a new age agreement.

Speaker Change: So.

Speaker Change: For all intents and purposes, we expect that to be covered and closed and then projected in the same fashion for 2024, So just a consistent approach there.

Speaker Change: I think that answers your question correct value.

Speaker Change: And yes, that's correct.

Speaker Change: And <unk>.

Speaker Change: So to the second point in our comments, we did we did kind of give you our view on the priorities and how we're managing through that so.

Speaker Change: Sure.

Speaker Change: Clearly I think that.

John: I just need to give you some color on that, but the Q4 numbers, as reported, do have the same thinking with respect to the upcoming contract built into them. In other words, we've assumed that from the expiry date, there will be approval for a new wage agreement. And so, for all intents and purposes, we expect that to be covered and closed and then projected in the same fashion for 2024. So just a consistent approach there. I think that answers your question, correct, Fadi?

Speaker Change: We've navigated through a couple of years here, where it's really about kind of stabilizing the operation and making sure that.

Speaker Change: Where we see more clearly and I think we start to see it and we have good confidence in 2024, we're looking a little bit further out that we've made and announcements on.

On an aircraft order not too long ago that will come in in 'twenty five 'twenty six 'twenty seven deliveries. So I think this is progressing per plan.

Speaker Change: Of course, we have shareholders' best interests.

Oh, it's top of mind.

Speaker Change: We'll do that in due course, and I think that that's a fair part of the capital allocation on a longer term.

John: Yes, yes, that's correct. And so to the second point, you know, in our comments, we did kind of give you our view on the priorities and how we're managing through that.

Speaker Change: Okay. Thank you.

Speaker Change: Chris Murray from <unk> capital markets. Please go ahead your line is open.

Chris Murray: Yes, thanks folks good morning.

John: Clearly, I think that, you know, we've navigated through a couple of years here where it's really about kind of stabilizing the operation and making sure that we see more clearly. And I think we'll start to see it, and we have good confidence in 2024. We're looking a little bit further out, you know, that we made an announcement on an aircraft order not too long ago that will come in in 25, 26, 27 deliveries. So, I think this is progressing for quite a while. And of course, we have shareholders' best interests always top of mind, and we'll do that in due course. And I think that that's a fair part of the capital allocation over the longer term. Okay, thank you, from ATB Capital Markets. Please go ahead; your line is open. Yeah, thanks, folks. Good morning.

Chris Murray: Turning back to the EBITDA guidance.

Chris Murray: It feels like it's a little bit wide this year and it has a bit of a big large band starting out the year.

Chris Murray: Wondering what when you're thinking about when you were setting those guideposts are there certain what are their most important risk factors that youre thinking that are driving either the top or the bottom of those ranges.

Speaker Change: Yes, Thats, a fair Thats a fair comment.

Speaker Change: Thank you.

Speaker Change: If you look at CASM, two five to $4 five.

Speaker Change: I would describe the items that.

Speaker Change: We're providing some of that pressure, so and even in my comments.

<unk> indicated that they will move around a little bit through the year. So.

Speaker Change: We just don't want to have a situation where for.

Speaker Change: Some small.

Speaker Change: The estimate adjustments, we we kind of the correct that every quarter. So you have a little bit of a range for some of this.

John: Maybe turning back to the EBITDA guidance, you know, it feels like it's a little bit wide this year and has a bit of a big, a large band starting out the year. Just wondering what, when you're thinking about, when you were setting those guideposts, are there certain, what are the most important risk factors that you think that are driving you to the top of the bottom? Yeah, that's a fair comment. I think that you should look at the chasm between two and a half to four and a half.

Speaker Change: Variability in those cost pressures.

Speaker Change: With respect to.

Speaker Change: The yield environment.

Speaker Change: As described kind of our view on just how does.

Speaker Change: It is a competitive environment, we wanted to stay in for.

Speaker Change: Front of the market.

Speaker Change: I think for that reason.

Speaker Change: We have also.

John: I mean, I described the items that were providing some of that pressure. So, and even in my comments, I've kind of indicated that they will move around a little bit through the year. So we just don't want to have a situation where for some small, admittable adjustments, we, we, we kind of have to correct that every quarter.

Speaker Change: Some some variability on overall I mean, if there is a very strong year year over year again.

Speaker Change: We see those yields hold up mark.

Speaker Change: <unk> indicated that were not assuming that youll growth, but if that did come in that would purchase the higher end of the range.

Speaker Change: Okay, that's fair, but nothing unexpected and anything kind of one time or kind of binary vantage just sort of a combination of the different inputs.

Speaker Change: Yes, it is and don't forget I mean, we guided unit capacity range six to eight.

John: So you have a little bit of a range for some of this variability in those cost pressures. With respect to, I think, the yield environment, and Mark has described, you know, kind of our view on, you know, just how there's a competitive environment, we want to stay in front of the market, and I think for that reason, you know, we have also some variability on overall, you know, I mean, if there's a very strong year, year over year again, and you can see those yields hold up, Mark indicated that we're not assuming a yield growth, but if that did come, then that would push us to the higher end of the range, but nothing you're not expecting anything kind of one time or kind of binary then it's just sort of a common Yeah, it is, it is.

Speaker Change: We've kind of been battling with different adversity, and I think we feel good about that range. So I would say that we wanted to make sure that we add.

Speaker Change: A clear line of sight.

So I mean, if capacity lightened up and got much better in terms of the adversity that we're facing that maybe that would be an opportunity as well, but nothing specific in terms of one time items or anything that would kind of.

Speaker Change: Grappling with other than the things that we've described in our commentary.

Speaker Change: Right.

Speaker Change: And then not to not to jump on this bandwagon too too much but just thinking about returns to shareholders. Because this is a question that we do get a fair amount.

John: And you know, don't forget. I mean, we got it here in a capacity range of six to eight. We've kind of been battling different adversity. And I think we feel good about that range. So I would say that we wanted to make sure that we had a clear line of sight. And so, you know, I mean, if capacity lightened up and got, you know, much better in terms of the adversity that we're facing, then maybe that'd be an opportunity as well. But nothing specific in terms of one-time items or anything that we were kind of grappling with other than the things that we've described in our commentary.

Speaker Change: Are there any stones or events that we should think about that may help change your thinking whether that's getting pilot agreement completed or.

Speaker Change: Changing your debt rating or something else like that that would maybe give us an indication that.

Speaker Change: It could become a more a more realistic approach at that point.

Speaker Change: No I think I think I mean and I appreciate all the interest it's.

Very valid.

Speaker Change: We are progressing per plan and I think we feel very confident that we are doing the right things at the right times.

Speaker Change: Sequence here.

Speaker Change: None of this lost on us in terms of how we'd like to get back to the things that we have done in the past, but we.

John: And then, not to jump on this bandwagon too, too much, but, you know, just thinking about returns to shareholders, because this is a question. Are there any milestones or events that we should think about that may help change your thinking, whether that's getting a pilot agreement completed or changing your debt rating or something else like that that would maybe give us an indication that it could become a more realistic approach at that point? No, I think, you know what I mean, and I appreciate all the interest. It's very valid and correct.

Speaker Change: We want to do that in a very responsible way and I think that the airline is potential here to be to be a strong performer right through the decades. So that will take a step at a time and I think everybody will be rewarded for that.

Speaker Change: Every stakeholder will find benefit if we do that right.

Speaker Change: Alright, Thanks, Rick.

Okay.

Speaker Change: Our next question comes from Jamie Baker from Jpmorgan. Please go ahead. Your line is open.

Oh, Hey, good morning, everybody a couple of questions for John So considering the cash balance.

Jamie Baker: Do you have the option to reset some of the bank term loan debt at a lower rate like we saw with United last earlier this week.

John: I think we're progressing according to plan, and I think we feel very confident that, you know, we're doing the right things at the right times in the right sequence here. And none of this is lost on us in terms of, you know, how we'd like to get back to things that we did in the past.

Jamie Baker: It sounds like when you answered <unk> question the answer is yes.

Speaker Change: I didn't fully get the question could you just repeat it.

Speaker Change: Do you have the option to reset some of the bank term loan debt at a lower rate, we saw United in the market.

John: But we want to do that in a very responsible way. And I think that the airline has the potential here to be a strong performer right through the decades. So that will take one step at a time. And I think everybody will be rewarded for that.

Speaker Change: Its deal earlier this week, yes, yes, yes, so great, yes, so and then really I mean.

Speaker Change: Yes.

Speaker Change: Some of what.

I meant with my commentary on the ability to continue to look for the best cost of <unk>.

Jamie Baker: Every stakeholder will find benefit if we do that right. Our next question comes from Jamie Baker from J.P. Morgan. Please go ahead; your line is open. Okay, good morning, everybody.

Speaker Change: Capital efficiency so.

Speaker Change: Repricing.

Speaker Change: <unk> been managing maturities and those kind of things are all part of a good sound comprehensive debt strategy.

John: A couple questions for John. So considering the cash balance... Do you have the option to reset some of the bank term loan debt at a lower rate like we saw with United earlier this week? It sounds like when you answered Conor's question, the answer is yes.

Speaker Change: We look at those things regularly.

Speaker Change: The market has.

Speaker Change: Tightened up a lot here in the last not too long short, while and so those are all opportunities that will keep on the front on the front burner.

Jamie Baker: I didn't fully understand the question; can you just repeat it? Sure. Do you have the option to reset some of the bank term loan debt at a lower rate?

Again as part of that kind of how do we use and deploy capital.

Speaker Change: We believe.

Speaker Change: A good way to.

John: We saw United in the market with, you know, its deal earlier this week. Yeah, yeah, yeah. So great.

Speaker Change: To do it and I think it sits on the comments as well that we are continuing to look at.

Speaker Change: Cost expensive debt.

Speaker Change: And then just a quick follow up on credit ratings, you have delta right now with our malls twice the net leverage sitting at <unk> three with a positive outlook.

John: Yes. So, really, I mean, you know, that's, that's, you know, some of what I meant with my commentary on the ability to continue to look for the best cost of capital efficiency. So repricing, you know, perhaps even managing maturities and those kinds of things are all part of a good, sound, comprehensive debt strategy. And we look at those things regularly. The market has tightened up a lot here in the last not too long, short while. And so those are all opportunities that we'll keep on the front burner. And again, it's part of that, you know, kind of how do we use and deploy capital, and that's, we believe, a good way to do it. And I think, you know, I said so in the comments as well, that we will continue to look at our most expensive debt.

Speaker Change: Air Canada, So youre not just lower I mean are you and the team pushing for upgrades is investment grade or discussion we should be <unk>.

Speaker Change: Or is that not one of your top priorities at the moment. Thanks for the time.

Speaker Change: Thank you so much.

Speaker Change: I don't want to make any announcements about at all.

Speaker Change: Investment grade targets I think we're going to do is we want to have balance.

Speaker Change: We do have access to pretty efficient.

Speaker Change: That when it comes to aircraft financing that almost.

Speaker Change: Trades like.

Speaker Change: Like investment grade cost so I think.

Speaker Change: It's a fair question that we do we're in contact rating each cell at a time.

John: And then just a quick follow-up on credit ratings, you know, you have Delta right now, with, what, almost twice the net leverage, you know, sitting at BAA3 with a positive outlook, to not just lower. Are you and the team pushing for upgrades? I mean, is investment grade a discussion we should be having, or is that not, you know, one of your, you know, top priorities at the moment? Thanks for your time. Thank you so much.

Speaker Change: We've come through like all airlines, a challenging period, and I think they'd like to see some some some printed results over a longer period of time.

Speaker Change: We're giving them good opportunity here to upgrade is during the year. We did have a couple of upgrades.

Speaker Change: I think that.

Speaker Change: Potential here to be kind of that will be across the board and we'll see when that happens and from that point on I think it just good performance will take us long wind.

That's great. Thanks, Kevin.

Speaker Change: Yes.

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

John: You know, I don't want to make any announcements about, you know, investment grade targets and stuff like this. I think what we want to do is we want to have a balance. We do have access to pretty efficient debt when it comes to aircraft financing that almost, you know, trades like investment grade costs. So I think it's a fair question that we do, and we're in contact with rating agencies all the time.

Savi: Hey, good morning, everyone.

Ken on the capacity commentary, you mentioned kind of long haul really driving it I was wondering if you could give a little bit more color on.

Savi: No.

Savi: What you are looking at particularly in the kind of the trough.

Savi: Atlantic on chat transporter markets, you know, how youre thinking about that the growth this year.

Ken: Sure so the SME market.

Ken: Our growth on the on.

Ken: On the Trans Pacific is really going to be the main driver for international growth. So we'll be looking at international growth that exceeds about 10% versus where we were last year, but most of that is driven.

John: We've come through, like all airlines, you know, a challenging period, and I think they'd like to see some printed results over a longer period of time. And I think, you know, we're giving them a good opportunity here to upgrade us during the year. We did have a couple of upgrades.

Ken: Yes.

Ken: Okay.

Ken: On transport area, we're looking at a decent level of growth above against about five.

Ken: And a lot of that is driven off of sort of intensifying our relationship with United across the hub routes.

Ken: But as well, we're adding more sixth freedom connectivity to support our international Route network and now we're seeing very strong results last year, but also as we look into 'twenty forward, even more interest in what we see so that's really primarily what's driving the capacity allocation for 'twenty four.

John: I think that, you know, there's potential here to be kind of a double B across the board, and we'll see when that happens. And from that point on, I think just good performance will take us a long way. That's great.

John: Thanks, Ken. Our next question comes from Savi Syth from Raymond James. Please go ahead, your line is open. Hey, good morning, everyone.

Speaker Change: That's helpful. Thanks, Marc and then if I.

Speaker Change: I might ask John just with the Capex plan.

John: Let me know if this is more for it in our Investor day.

Mark: If I can, on the capacity commentary, you mentioned kind of the long haul really driving it. I was wondering if you could give a little bit more color on, you know, what you're looking at, particularly in the kind of the transatlantic and transborder markets, you know, how you're thinking about the growth this year. Sure, Savi, our growth in the Trans-Pacific is really going to be the main driver for international growth. So we'll be looking at international growth that exceeds about 10% versus where we were last year, but most of that is driven by the On Transborder, you know, we're looking at a decent level of growth above five, and a lot of that is driven off of, you know, sort of intensifying our relationship with United across the hub routes. But, as well, we're adding more six freedom connectivity to support our international root network.

John: 2020, strategic you get that step up.

Speaker Change: The reason.

Speaker Change: News on OEM deliveries, and I think thats impacting both Boeing and Airbus.

John: Any kind of early thoughts on how realistic that plan is or if it's more likely to kind of set down here.

Speaker Change: Yes hard to I guess hard to.

Speaker Change: Try to.

Speaker Change: Guests.

Speaker Change: Our committed schedule and what our contract and what our agreements are in but I mean.

Speaker Change: It's been a reality right where.

Speaker Change: We've experienced that ourselves.

We should have had more aircraft <unk> hundred 20 ones and so on.

Speaker Change: Than we do right now.

Speaker Change: We watched this very carefully.

Speaker Change: We have made in the past some decisions about acquiring interim lift and doing other things to be able to support some of that capacity and come in.

Speaker Change: I think just stay tuned it is not that.

Speaker Change: Don't have an answer for you its just that I'd be guessing to something that.

Mark: And we saw very strong results last year, but also as we look into twenty four, we're even more encouraged by what we see. So that's really primarily what's driving the capacity allocation. That's helpful.

Speaker Change: We're going to play this.

Speaker Change: Closely and.

Speaker Change: And they'll work with Marc and the network team to make sure that they have the appropriate aircrafts, where they need them and when we do see that there is challenges. There then we'll make decisions accordingly for the network but.

John: Thanks, Mark. And then, if I might ask, John, just, you know, with the CAPEX plan, and let me know if this is more for an investor day, you know, 2026. You do get that step up. Given the recent kind of news on OEM deliveries, and I think that's impacting both Boeing and Airbus, just any kind of early thoughts on how realistic that plan is, or if it's more likely to kind of step down? Yeah, hard to, I guess, hard to try to outguess our committed schedule and what our contract and what our agreements are. But, you know, I mean, it's been a reality, right, where we've experienced it ourselves. We should have had more aircraft here, 321s and so on, than we do right now. We will watch this very carefully.

Speaker Change: Stop the call 26, I'm still very low.

Speaker Change: <unk>.

Speaker Change: This will stay as is.

Speaker Change: As it is committed and I know that despite all the challenges that both Oems to stay very close to us and worked hard to achieve those schedules.

Speaker Change: Understood. Thank you.

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

Stephen Trent: Good morning, everyone and thanks for taking my question.

Maybe the first one is for mark or Michael perhaps.

Stephen Trent: We heard.

Stephen Trent: One of the lesser is mentioning kind of a rebound in sort of air cargo demand and maybe some of that's coming from.

John: And we have made in the past some decisions about, you know, acquiring interim lifts and doing other things to be able to support some of that capacity that hasn't come in. I think just stay tuned. It's not that I don't have an answer for you.

Stephen Trent:

Stephen Trent: Greater difficulty.

Stephen Trent: And maritime channels ships getting attacked in the middle east or what have you.

John: It's just that I'd be guessing at something that, you know, we're going to play this, you know, closely. And they'll work with Mark and the network team to make sure that they have the appropriate aircraft where they need them. And when we see there's challenges there, then we'll make decisions accordingly for the network. But tough to call 26.

Stephen Trent: Are you guys seeing any sort of indications.

Stephen Trent: On your air cargo side is sort of.

Stephen Trent: You look at what.

Stephen Trent: Revenue trends are doing.

Speaker Change: Hi, Stephen so on them on that specific question that impacted the Red Sea Hasnt really.

John: I'm still very hopeful that this will stay as it's committed, and I know that despite all the challenges, both OEMs will stay very close to us and work hard to achieve those schedules. Okay. Thank you. Our next question comes from Stephen Trent from Citi. Please go ahead, your line is open. Good morning, everyone.

Stephen Trent: <unk> had much of an impact on us because it's more of an Asia Europe dynamic.

Stephen Trent: However.

Stephen Trent: We had a bit of a slower start in January but as we look into February and beyond.

Stephen Trent: We're starting to see volumes pick up and we're starting see some yields also pick up.

Stephen Trent: And our 24 assumption on cargo is more volume driven than yield driven.

Stephen Trent: So we're starting to see some positive indicators, how it relates to what's going on the <unk>, It's really hard to link right now.

Stephen Trent: And thanks for taking my question. Maybe the first one is for Mark or Michael. Perhaps, you know, we heard one of the lessors mentioning kind of a rebound and sort of air cargo demand, and maybe some of that's coming from, you know, greater difficulty and maritime channels, ships getting attacked in the Middle East or what have you. Are you guys seeing any sort of indications on your air cargo side as sort of what revenue trends are doing? Hi Steve, so on that specific question, the impact of the Red Sea hasn't really... had much of an impact on us because it's more of an Asia-Europe dynamic. However, you know, we had a bit of a slower start in January, but as we look into February and beyond, we're starting to see volumes pick up, So we're starting to see some positive indicators, but how it relates to what's going on in the Red Sea is really hard to link.

Speaker Change: Okay very helpful.

Speaker Change: And I believe I heard that John debate on one of your folks mentioned.

Speaker Change: Higher infrastructure costs, this year and I know.

Speaker Change: You've mentioned in the past sort of the Canadian Airport system There've been some challenges there but.

Speaker Change: Any color to what extent those.

Regulatory costs infrastructure costs are.

Our feeding through to the 2024 CASM guide.

Speaker Change: Yeah sure so.

Speaker Change:

Speaker Change: If you look at.

Speaker Change: The year over year.

Speaker Change: 254, 5%.

Speaker Change: CASM increase.

Speaker Change: It's one of the elements right. So we talked about kind of three.

Speaker Change: Standout and really it's just assumptions for pilot contract, it's those airport fees and infrastructure costs.

Speaker Change: And it is also our best view of the cost of APR.

John: Okay, very helpful. And I believe I heard that John DeBert or one of you folks mentioned higher infrastructure costs this year. And I know, you've mentioned in the past, sort of the Canadian airport system, there have been some challenges there. But, you know, any color on to what extent, you know, those regulatory costs, and infrastructure costs are feeding through to the 2020 forecast. Yeah, sure. So, you know, if you look at the year over year, two and a half, four and a half percent CASM increase, it's one of the elements, right?

Speaker Change: I mean, you probably could go up on that and make your own conclusions but.

Speaker Change: The.

Speaker Change: I would say that.

Speaker Change: It's one of those that's kind of a it's a.

Speaker Change: Mixed mixed.

Speaker Change: A mixed blessing in the sense that I think that we would like to see airport infrastructure improve we do.

Speaker Change: I believe that there's opportunity for.

Speaker Change: For for better Airport development.

Speaker Change: In our business and I think just came passenger in general.

Speaker Change: And so to some degree those costs are kind of the other side of that coin and there'll be probably a very long term multi year programs and projects that.

John: So, we talked about the kind of three that stand out, and really, it's just the assumption for a pilot contract. It's those airport fees and infrastructure costs, and it is also our best view of the cost of APPR. So, I mean, you probably can run some math and make your own kind of conclusions, but the, I would say that it's kind of a mixed blessing in the sense that we would like to see airport infrastructure improved. We do believe that there's opportunity for better airport development for our business, and I think just the Canadian passenger in general. And so, to some degree, you know, those costs are kind of the other side of that coin, and there'll probably be, you know, very long-term, multi-year programs and projects that we'll feel through those airport improvement programs.

Speaker Change: Sure.

Speaker Change: Will feel through those those airport improvement programs and so we're we're matching the business. So we can integrate those costs.

Speaker Change: Kind of.

Speaker Change: We see it is that there is opportunity for growth and at the same time, we will manage the business. So we can absorb those costs.

Speaker Change: Okay I appreciate it John and thank you everybody.

Speaker Change: Our next week.

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

Matthew Lee: Hey, good morning, guys. Thanks for taking my question, maybe a follow up to <unk> earlier question. If yields remained somewhat flat in 2024 and CASM is expected to grow our math would suggest that load factors. We'll have to continue to be kind of a 2023 levels. Maybe just talk about the levers are you going to keep that kpis high and the sustainability of mid 80.

John: And so, we're, you know, matching the business so we can integrate those costs, and that's kind of, you know, how we see it is that there is an opportunity for growth, and at the same time, we'll manage the business so we can absorb those costs. Okay. I appreciate it, John. And thank you, everybody.

Matthew Lee: Load factor is lower okay.

Speaker Change: Sure Matthew Great question, So firstly demand environment continues to be pretty strong and.

Speaker Change: And as far as we're seeing our forward numbers in Q1, Q2, we're going to be able to maintain that load factor and we've got many levers to play with so we can reallocate capacity to where we see the strength So Asia being one.

Matthew Lee: Our next question comes from Matthew Lee from Canaccord. Please go ahead, your line is open. Hey, morning, guys.

Speaker Change: We still see very strong demand on the trans Atlantic in particular for leisure destinations in southern Europe.

Mark: Thanks for taking my question. Maybe a follow-up to Konark's earlier question, you know, if yields remain somewhat flat in 2024, and cash is expected to grow, you know, our math would suggest that load factors will have to continue to be kind of at 2023 levels. Maybe just talk about the levers you're using to keep that KPI high and the sustainability of mid 80 load factors low.

Speaker Change: And we've got the sixth freedom lever to play with that.

Speaker Change: Significant untapped potential for us so all of this combined puts us in a high load factor dynamic for 'twenty.

Speaker Change: Okay, right and then maybe on the fuel side can you, perhaps talk about your hedging strategy going into 'twenty 'twenty four.

Speaker Change: How far in advance are you comfortable hedging fuel costs.

Speaker Change: So our.

Speaker Change: Our base premises as debt.

Speaker Change: Is that volatility.

Speaker Change: Volatility in fuel has kind of recovered and reflected through two fares and so thats that.

Mark: Sure, Matthew, great question. So firstly, you know, the demand environment continues to be pretty strong, and as we're seeing our forward numbers in Q1, Q2, you know, we're going to be able to maintain the load factor. And we've got many levers to play with.

Speaker Change: And the base the base premises.

Speaker Change: Right now we don't have any active.

Speaker Change: Hedges in place. So we are we are buying fuel at.

Speaker Change: Current costs.

In terms of the way, we think about it I guess.

John: So we can reallocate capacity, Air Canada. Air Canada, you know, we still see very strong demand on the transatlantic, in particular for leisure destinations in Southern Europe. And we've got this six freedom lever to play with that, you know, has significant untapped potential for us. So all this combined puts us in a high load factor dynamic. Okay, right.

Speaker Change: If we had reason to believe that.

Speaker Change: There was significant volatility.

Speaker Change:

Speaker Change: It's hard to start.

Speaker Change: Go out too far on the curve, sometimes will protect bookings, where we have very full books and very high.

Speaker Change: Yes.

Matthew Lee: And then maybe on the fuel side, can you perhaps talk about your hedging strategy going into 2024? You know, how far in advance are you comfortable hedging fuel? So, our base premises is that volatile fuel is kind of recovered and collected through fares, and so that's kind of the base premises.

Speaker Change: I capacity season, but other than other than really protecting the book, we don't really go out too long on the curve.

Speaker Change: Okay.

Speaker Change: Alright, Thanks, taking my question.

Speaker Change: Q.

Speaker Change: Our last question will come from David Ocampo from <unk> Securities. Please go ahead. Your line is open.

David Tyerman: Hey, Thanks, Good morning, everyone. Just a quick one for me John obviously, there's a lot of capital being spent over the next few years and Thats been discussed pretty heavily on the call and that tends to happen. When you guys go through these larger fleeting initiatives.

John: Right now, we don't have any active hedges in place. So we are buying fuel at current costs. In terms of the way we think about it, I guess, you know, if we have reason to believe that, you know, there was significant volatility and, you know, it's hard to start to go out too far on the curve. Sometimes we'll protect bookings where we have very full books in very high-capacity seasons. But other than really protecting the book, we don't really go out too long on the curve.

David Tyerman: Just trying to back into kind of a more normalized capex number I think you guys provided one in the past just curious what that would look like on a maintenance level just given all the inflationary pressures that we've seen.

Speaker Change: I think that that's probably a we have we are in the next few years kind of laid out in our in our disclosure.

We do have a peak number I think in 2026.

John: All right, thanks for taking my question. Our last question will come from David Ocampo from Cormark Securities. Please go ahead, your line is open. Thanks. Good morning, everyone.

Speaker Change: <unk>.

Speaker Change: I think that we'll look at we'll look at what the airline should look like by the time, we get to the end of the decade and make sure that we're in the right spot for 2030 and beyond.

Speaker Change: From a from a normalized capex I recall, we run around 12% or so of revenue and Thats historically, where we run we have an international higher weight to this airline so sometimes that does also play in the <unk> and the overall capex mix.

David Tyerman: Just a quick one for me, John. Obviously, there's a lot of capital being spent over the next few years, and that's been discussed pretty heavily on this call. And that tends to happen when you guys go through these larger, fleeting initiatives. I'm just trying to back into kind of a more normalized CapEx number. I think you guys have provided one in the past. Just curious what that would look like on a maintenance level, just given all the inflationary pressures that we've. You know, I think that's probably what we have the next few years kind of laid out in our, in our disclosure. And we do, we do have, you know, a peaking number, I think, in 2026. I think that we'll look at what the airline should look like by the time we get to the end of the decade and make sure that we're in the right spot for 2030 and beyond.

Speaker Change: I mean, maybe a conversation for investor day to provide longer term looks but what we have in our disclosure gives you a pretty good idea of what you can expect over the next 36 months longer term I think we'll think about what the fleet diesel look like for 2030, and then make some decisions around that.

Speaker Change: 12% of revenue all in probably looks like like like a good place to start.

Speaker Change: Okay. That's perfect. Thanks, so much around.

Speaker Change: We have no further questions I would like to turn the call back over to <unk> for closing remarks.

Speaker Change: Thank you. Thank you very much for joining us on this call. This morning. Once again should you have any further questions. Please reach out to us at Investor Relations Leslie Magee.

David Tyerman: I think, you know, from a normalized CapEx, if I recall, we run around 12% or so of revenue, and that's historically what we run. We have an international higher weight to this airline, so sometimes that does also play in the overall CapEx mix. So, I mean, maybe a conversation for Investor Day to provide longer-term outlook, but what we have in our disclosure gives you a pretty good idea of what you can expect over the next 36 months. Longer term, I think we'll think about what the fleet needs to look like for 2030 and then make some decisions around that. You know, 12% of revenue all in probably looks like a good place to start.

Speaker Change: And I think it will slip in next one on Germany.

Speaker Change: Thanks.

Speaker Change #100: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change #100: [music].

Speaker Change #100: Yes.

Speaker Change #100: Yes.

Speaker Change #100: [music].

Speaker Change #100: Okay.

Speaker Change #100: [music].

John: Okay, that's perfect. Thanks so much, everyone. We have no further questions. I would like to turn the call back over to Valérie Durand for closing remarks. Thank you. Thank you very much for joining us on this call this morning. Once again, should you have any further questions, please reach out to us at Investor Relations. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #100: Okay.

Speaker Change #100: [music].

Speaker Change #100: Okay.

Speaker Change #100: Yes.

Speaker Change #100: Yes.