Q1 2024 Air Canada Earnings Call

Operator: Good morning, and welcome to Air Canada's first quarter 2024 results conference call. All lines are in the listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. To ask a question, you'll need to press the 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 Durand, Head of Investor Relations and Corporate Sustainability at Air Canada. Thank you. Please go ahead.

Good morning, and welcome to Air Canada's first quarter 'twenty 'twenty four results conference call.

All lines are in a listen only mode.

After the Speakers' presentation, we will conduct a question and answer session.

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

As a reminder, this conference call is being recorded.

Speaker Change: I would now like to turn the call over to God I figured you her head of Investor Relations and corporate sustainability at Air Canada. Thank you. Please go ahead.

Valérie Durand: Thank you, Juliane. Hello, and welcome to our first quarterly call of 2024. Joining us this morning are Michael Rousseau, our President and CEO, Mark Galardo, our Executive Vice President of Revenue and Network Planning, and John Viebert, our Executive Vice President and CFO. Other executive team members are with us as well this morning.

Speaker Change: Yeah, Hello, Boswell could even end up coming out because you came at the end of their move and get.

Speaker Change: Welcome and thank you for attending our first quarter call of 2020 for joining US. This morning are Michael Rousseau, our president and CEO, Mark Gallardo, Our executive Vice President of revenue of network planning and John <unk>, Our executive Vice President and CFO. Other executive team members are with us as well this morning, Mike.

Valérie Durand: Mike will begin this call with a brief overview of the quarter, and Mark will provide comments on our revenue, network updates, and trends. And John will speak on our financial performance before turning it back to Mike, after which we will take questions from equity analysts. I remind you that 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 uncertainty.

Michael Stewart Rousseau: Mike will begin the call with a brief overview of the quarter.

Mark Galardo: Mark will provide comments on our revenue network updates and trends and John will speak on our financial performance before turning it back to Mike After which we will take questions from equity analysts I remind you that today's comments and discussion may contain forward looking information about air Canada's outlook objectives and strategies that are based on.

Speaker Change: On assumptions and subject to risks and uncertainties, our actual results could materially differ from any stated expectations. Please refer to our forward looking statements in air Canada's first quarter, New first quarter's news release available on Air Canada Dot Com and on SEDAR, plus I now would like to turn the call back over to.

Valérie Durand: Our actual results could materially differ from any stated expectation. Please refer to our forward-looking statements in Air Canada's first quarter news release, available on aircanada.com and on CDAR+. I now would like to turn the call back over to Mike.

Speaker Change: Mike.

Michael Stewart Rousseau: Great, thank you, Valerie. Good morning, bonjour, and thank you for joining us. Our first quarter results were solid and largely in line with our internal expectations. They show that we perform well from both the financial and operational points of view in a more complex environment. This success reflects the quality of our management team and employees, our strategic execution, and the remarkable strength of our brand. For the quarter, we reported operating revenue of more than $5.2 billion, an increase of nearly $340 million from a year ago.

Mike: Great. Thank you Valerie and good morning.

Mike: Thank you for joining us.

Michael Stewart Rousseau: Adjusted EBITDA was $453 million, up $42 million from the prior period, and our operating income shifted to a profit of $11 million, up $28 million from the prior year. Our leverage ratio improved to 0.9 at March 31 compared to 1.1 at the end of 23 and 5.1 at the end of 22. Also important in the long term, we continue to reduce gross debt as part of our ongoing commitment to strengthen our balance sheet. I am very pleased to see our efforts recognized by the credit rating agency community and welcome S&P's recent rating upgrade to Double B. At the close of the quarter, our total liquidity was $10 billion.

Mike: Our first quarter results were solid and largely in line with our internal expectations.

Mike: Shall we perform well for both the financial and operational point of view and a more complex environment.

Mike: The success reflects upon the quality of our management team and employees are strategic execution and the remarkable strength of our brand.

Mike: For the quarter, we reported operating revenue of more than $5 2 billion, an increase of nearly $340 million from a year ago.

Mike: Adjusted EBITDA was $453 million up 42 million.

Mike: Period.

Mike: And our operating income shifted to a profit of $11 million up $28 million from the prior year.

Mike: Our leverage ratio improved 2.9 at March 31, compared to one one at the end of 'twenty three and five one at the end of 'twenty two.

Mike: Also important for the long term, we continue to reduce gross debt as part of our ongoing commitment to strengthen our balance sheet.

Mike: Very pleased to see our efforts were recognized by the credit rating agency community and welcome S&P's recent rating upgrades to double B.

Mike: The closed the quarter, our total liquidity was $10 billion.

Michael Stewart Rousseau: We are confident about our performance for the balance of 2024 and that we will deliver on the full year guidance we provided in February. I take this opportunity to thank all our employees for their hard work this past quarter. Winter is challenging every year, and our employees rose, as they always do, to the task of safely transporting nearly 11 million customers to their destinations with care and with class. More than this, they did so while making meaningful improvements to our operation.

Mike: We are confident about our performance for the balance of 2024.

Mike: We will deliver on full year guidance, we provided in February.

Speaker Change: I take this opportunity to thank all our employees for their hard work this past quarter.

Speaker Change: Enter is challenging every year and our employees rose as they always do to the task of safely transporting nearly 11 million customers to their destinations with care and with class.

Speaker Change: More than this they did so while making meaningful improvements to our operation, notably our system wide on time arrival rate in the quarter increased a full 13 percentage points from the first quarter of 'twenty three.

Michael Stewart Rousseau: Notably, our system-wide on-time arrival rate in the quarter increased a full 13 percentage points from the first quarter of 2020. We achieve these and other improvements in operational metrics through careful planning, diligent execution, and without regulatory intervention. These achievements are obviously important to our customers, and they also reflect increased efficiency in our airline, which in turn benefits our shareholders. I also thank our customers for their loyalty in choosing Air Canada. We are committed to continuing to earn this loyalty by making even more improvements to better serve them in the future. Thank you. I'll see you. Over to you, Mark.

Speaker Change: We achieved these and other improvements in operational metrics through careful planning diligent execution and without regulatory intervention.

Speaker Change: These achievements are obviously important to our customers and they are also they also reflect increased efficiency of our airline which in turn benefits our shareholders.

Speaker Change: I also thank our customers for their loyalty in choosing air Canada.

Speaker Change: We are committed to continuing to earn this loyalty by making it even more improvements to better serve them in the future. Thank you see over to you Mark.

Mark Galardo: Thanks Mike, and good morning everyone. Bonjour, j'aimerais d'abord féliciter nos employés pour ces résultats solides. Thanks to all our employees for their commitment and passion in helping us deliver our Q&A. I'll start with our passenger revenues, which increased 9% year-over-year to over $4.44 billion. We see that, as expected, pent-up demand and revenge travel are slowing over time. Therefore, we witnessed the normalization of the yield environment in some markets in the first quarter of 2024 when compared to the same period in 2023.

Mark: Thanks, Mike and good morning, everyone.

Mark: All right.

Mark: Hey, Deb I'll finish paying those off what you foresee in the Senate.

Mark: Thanks to all our employees for their commitment and passion in helping us deliver our Q1 results.

Mark: I'll start with our passenger revenues, which increased 9% year over year to over $4 4 billion.

Mark: We see that as expected pent up demand in preventing travel factors are slowing overtime.

Therefore, we witnessed the normalization of the yield environment in some markets in the first quarter of 2024, when compared to the same period in 2023.

Mark Galardo: As discussed during our last earnings call, we had forecasted this normalization to occur in our 2024 outlook. I'd like to call out the performance in the domestic and Pacific markets. Domestic Yields Outpace Capacity Growth As to our international network, you will recall we plan to pivot capacity to the Pacific from the Atlantic in order to capture the tremendous Asia-Pacific pent-up demand. As a result, our Pacific revenues increased nearly 37% year over year, delivering yields that were in line with those seen in the first quarter of 2023. This is a great outcome as we saw yield strength even with the increased capacity and a longer average stage length.

As discussed during our last earnings call, we had forecasted this normalization to occur in our 2020 for outlook.

Mark: I'd like to call out the performance in the domestic and Pacific markets.

Mark: Mystic yields outpaced capacity growth.

I'm, sorry International network.

Mark: You will recall, we plan to pivot capacity to the specifics on the Atlantic in order to capture the tremendous Asia Pacific Pent up demand.

As a result, our Pacific revenues increased nearly 37% year over year delivering yields that were in line with those seen in the first quarter of 2023.

Mark: This is a great outcome as we saw yield strength, even with the increased capacity any longer average stage length.

Mark Galardo: This speaks to the diversification of our network as we balance with other sectors of our network. Six Freedom Traffic continues to perform extremely well, with double-digit growth in both traffic and revenues year over year. Our network is designed to capture this traffic, which helps us even out the traditional seasonality peaks and valleys. Take, for example, the school year changes in the U.S., which now strengthen June with the strategy.

Mark: This speaks to the diversification of our network as we balance with other sectors of our network.

Mark: Sixth freedom traffic continued to perform extremely well with double digit growth in both traffic and revenues year over year.

Mark: Our network is designed to capture this traffic, which helps us even out the traditional seasonality peaks and valleys.

Mark: Take for example, the school year changes in the U S, which now strength in June on this topic.

Mark Galardo: We know that Six Freedom has some great runway and opportunities ahead, and this is supported by our joint venture with both United Airlines and Lufthansa, which enables each carrier to offer more destinations to customers. Premium products account for 30% of the growth in total passenger revenue. Corporate demand remains steady as we are seeing positive indicators into Q2 for North America, which is the bulk of where the traffic is for us. Air Canada vacations delivered consistently, driving higher ground package revenues versus the same period last year. Now on to Cargo.

Mark: We know that six freedom has some great runway and opportunities ahead and this is supported by our joint venture with both United Airlines, and Lufthansa, which enables each carrier to offer more destinations for customers.

Mark: Premium products accounted for 30% of the growth in total passenger revenue.

Mark: Corporate demand remains steady as we are seeing positive indicators into Q2 for North America, which is the bulk of where the traffic is for us.

Mark: Air, Canada, vacations delivered consistently and driving higher ground package revenues versus the same period last year.

Mark Galardo: Despite higher volumes, revenues declined 23 million year-over-year due to softer... The volumes were aligned with our expectations, and recently, we have seen encouraging signs of volume pick-up. To adjust to market conditions, we have tempered our future freighter capacity growth and removed two planned Boeing 767 freighters from 2024 and 2025, which in aggregate resulted in a one-time operating expense of $20 million for the quarter. Our adjusted EBITDA of $453 million includes this one-time charge.

Mark: Now on to cargo despite higher volumes revenues declined $23 million year over year due to softer yields.

Mark: Volumes were aligned with our expectations and recently, we have seen encouraging signs of volume pick up.

Mark: To adjust to market conditions, we have tempered our future freighter capacity growth and removed two planned Boeing 737 freighters from 2024, and 2025, which in aggregate resulted in a one time operating expense of $20 million for the quarter.

Mark: Our adjusted EBITDA of $453 million includes this one time charge.

Mark Galardo: Remember that our incoming Boeing 787-10 will have larger cargo capacity, driving our ability to take advantage of global cargo flows through our hub. Cargo is a good complementary business for us and an important lever to differentiate our revenue streams. As we look to spring and summer, our booking curves indicate healthy demand across Canada. It is, however, important to note that 2023 was a particular demand environment in which we experienced strong yields and load factors driven by pent-up demand and challenge capacity. We do not expect to replicate those exact same conditions in the first quarter, nor do we expect them to continue in the future.

Mark: Remember that our incoming Boeing 77 Dash 10 will have larger cargo capacity driving our ability to take advantage of global cargo flows through our hubs.

Mark: Cargo is a good complementary business for us and an important lever to differentiate our revenue streams.

Mark: As we look to spring and summer are booking curves indicate healthy demand across the system.

However, important to note that 2023 was a particular demand environment in which we experienced strong yields and load factors driven by pent up demand and challenge capacity.

Mark: We do not expect to replicate those exaction conditions in the first quarter, nor do we expect them going forward.

Mark Galardo: Demand itself is traditionally tied to GDP growth, and economic surveys point to expected real GDP growth in the Canadian economy. Moreover, the travel indicators show overall demand growth at the industry level and continue to show robust market growth for air travel to, from, and within Canada versus 2020. Given the normalization that we're seeing, we're encouraged by the overall healthy demand signals and the overall composition of our traffic sources. And as we look into Q2, we see further strengthening of our domestic network versus the same period in 2023. We will continue to invest in capacity in the domestic sector.

Mark: Demand itself is traditionally tied to GDP growth and economic surveys point to expected real GDP growth in the Canadian economy.

Mark: Moreover, the travel indicators show overall demand growth at the industry level and continuing to show robust market growth for air travel to from and within Canada versus 2023.

Mark: Yeah.

Mark: Given the normalization that we're seeing we're encouraged by the overall healthy demand signals in the overall competition composition of our traffic sources.

Mark: And as we look into Q2, we see further strengthening of our domestic network versus the same period in 2023.

Mark: We will continue to pivot capacity in the domestic sector.

Mark Galardo: Our U.S. network is experiencing considerable capacity growth. It is, however, important to consider that this capacity investment is longer term in nature and part of the strategy to increase our share of the Canada-U.S. trans-border market. We anticipate that Q2 will show better Six Freedom results in 2024 than in 2023, and we continue to believe in the potential of diversifying our international network traffic. New routes to Charleston from Toronto and to Austin and St. Louis from Montreal are all showing early, promising signs, and we expect these routes to be financially accretive to our overall network.

Mark: Our U S network and experiencing considerable capacity growth.

Mark: It is however important considered that dish capacity investment is longer term in nature and part of the strategy to increase our share of the Canada U S Transborder market.

Mark: We anticipate that Q2 will show better <unk> results. In 2024, then in 2023, and we continue to believe in the potential of diversifying our international network traffic feed.

Mark: New routes to Charleston from Toronto, and too often in St. Louis for Montreal are all showing early promising signs and we expect these routes to be financially accretive to our overall network.

Mark Galardo: The Sixth Freedom Opportunity continues to be an important growth lever to our overall commercial strategy. Internationally, we expect strong demand and yields for the Pacific heading into summer. We've reallocated capacity from Europe to Asia with new routes to Osaka from Toronto and to Seoul from Montreal. We've also launched a new historic service to Singapore from Vancouver. Each of these new routes looks promising this summer and should be performing above expectations.

Mark: The sixth freedom opportunity continues to be an important growth even richer over overall commercial strategy.

Mark: Internationally, we expect strong demand and yields yields for the Pacific heading into summer.

Mark: We've reallocated capacity from Europe to Asia, with new routes to Osaka from Toronto and to sell from Montreal.

Mark: We've also launched a new historic services, Singapore from Vancouver.

Mark: Each of these new routes loops pumps in the summer and shouldnt be performing above expectations.

Mark Galardo: Demand to Japan continues to stand out. With respect to the Atlantic, we continue to see strength in the Mediterranean markets, and we've increased capacity to various points in Italy, Greece, and Spain, where demand is not only strong from Canada but also on a six-region basis. And early signals on our new Madrid-Montreal route also look quite promising. Our summer 2024 international capacity is growing by 30% to Asia Pacific and 25% to key leisure destinations in Southern Europe compared to last summer.

Mark: <unk>, Japan continues to stand out.

Mark: With respect to the Atlantic we continue to see strength in the Mediterranean markets and we've increased capacity at various points in Italy, Greece, and Spain, where demand is not only strong from Canada, but also on a 600 basis.

Mark: In early signals on our New Madrid, Montreal Route also look quite promising.

Mark: Our summer 2024 international capacity is growing by 30% into Asia Pacific and 25% to key leisure destinations in southern Europe compared to last summer and.

Mark Galardo: And that gives our customers a wide variety of exciting options across Europe and Asia for planning their summer holiday travels, along with a choice of 120 destinations in North America. We continue to believe in the promise of international market growth. Canada is the fastest growing G7 economy among OECD countries. This, combined with our six-freedom network and the natural geographic advantage of our three international hubs, gives us multiple solid growth options globally in the medium and longer-term.

Mark: And that gives our customer our customers a wide variety of exciting options across Europe and Asia for planning their summer holiday travels along with a choice of 120 destinations in North America.

We continue to believe in the promise of international market growth.

Mark: <unk> is the fastest growing G seven economy amongst the OECD countries.

Mark: This combined with our sixth Freedom network and the natural geographic advantage of our three international hubs gives us multiple solid growth options globally in the medium and longer term horizons.

Mark: Yes.

Mark Galardo: Turning back to the GDP premise, supporting demand growth, we have some catching up to do considering we're still behind 2019 levels of capacity. However, when we look at the 6 freedoms traffic and immigration inflows and outflows, these sources of traffic are resilient and not directly linked to GDP. Different points of sale for this traffic also add to the diversification of our revenue with different current... So when you consider this and the fact that our customer base is diverse, meaning that we do not target one single type of customer, we remain confident in our unique and highly attractive business. Thank you, merci, John.

Mark: Turn it back to the GDP premise supporting demand growth, we have some catching up to do considering we're still behind 2019 levels of capacity.

Mark: When we look at the sixth freedom traffic and immigration inflows and outflows. These sources of traffic are resilient not directly linked to GDP.

Mark: The different points of sales for this traffic also adds to the diversification of our revenue with different currencies.

Mark: So when you consider this and the fact that our customer base and diverse meaning we do not target target one single type of customer we remain confident in our unique and highly attractive business model.

Speaker Change: Thank you Mercy Josh.

John Di Bert: Merci Marc, good morning everyone, bonjour à tous. I'll start by saying that I'm very pleased with the capital management actions we took in the quarter, which I'll speak to shortly, and the continued focus on managing controllable costs, illustrating our ability to convert capacity growth into unit cost efficiency. Notwithstanding some natural headwinds, in both cases, our progress demonstrated the continued strengthening of Air Canada's position as it readies for the next chapter of growth as Canada's global network carrier. Let's get right into some specifics.

Speaker Change: Most of the Mark and good morning, everyone.

Speaker Change: I'll start by saying that I'm very pleased with the capital management actions, we took in the quarter, which I'll speak to shortly.

Speaker Change: And the continued focus on managing controllable costs illustrating our ability to convert capacity growth into unit cost efficiency, notwithstanding some natural headwinds.

Speaker Change: In both cases, our progress demonstrated the continued strengthening of air Canada's position is it ready for the next chapter of growth as Canada's global metric carrier.

Speaker Change: Let's get right into some specifics.

John Di Bert: Q1 delivered year-over-year capacity growth of 11%, while operating expenses grew 6% to $5.2 billion, including the benefits of an 18% decline in jet fuel prices. On a unit cost basis, our adjusted chasm grew 1.6% year over year. Landing at 14.76 cents for Q1, and reflecting improved productivity and the early benefits of scale as we restore capacity, Q1 performance was within our expectations, supports our yearly guidance, and represents a solid performance relative to our peers.

Speaker Change: One delivered year over year capacity growth of 11%, while operating expenses grew 6% to $5 2 billion.

Speaker Change: The benefits of an 18% decline in jet fuel prices.

Speaker Change: On a unit cost basis, our adjusted CASM grew one 6% year over year.

Speaker Change: Landing at $14 76 for Q1, and reflecting improved productivity and the early benefits of scale as we restore capacity.

Speaker Change: Q1 performance was within our expectations supports our yearly guidance and represents a solid performance relative to our peers.

John Di Bert: To better understand the underlying evolution of our costs, let me provide some color on expenses that increased faster than our capacity growth, as well as the indicators of offsetting efficiency. Our labor expense increased to 21%, driven by accruals for profit sharing and other wage-related initiatives, and by 7% higher FTEs year over year.

Speaker Change: To better understand the underlying evolution of our cost let me provide some color on expenses that increased faster than our capacity growth.

Speaker Change: As well as the indicators of offsetting efficiencies.

Speaker Change: Our labor expense increased to 21% driven by accruals for profit sharing and other wage related initiatives.

Speaker Change: And by 7% higher ftes year over year.

John Di Bert: I remind you that this increase includes our accrual for a future pilot agreement. This accrual is based on our best estimates, considering the Canadian market and our desire to continue to be a leading employer of choice for Canadian pilots. IT expenses increased 27% year-over-year.

Speaker Change: I remind you that this increase includes our accrual for future pilot agreement.

Speaker Change: This accrual is based on our best estimates considering the Canadian market and our desire to continue to be a leading employer of choice for Canadian pilots.

Speaker Change: <unk> expenses increased to 27% year over year.

John Di Bert: While most of our technology costs are highly correlated to our 11% system capacity and traffic growth, we're also steadily increasing our investments in technology as we focus on modernizing our systems, transforming the way we do business, and upgrading our cybersecurity resilience. Well, some of the increases relate to higher recurring license and cloud service costs. However, we do experience non-recurring expenses for change management and cutover activities. The modernization of our technology stack will translate into a better airline.

Speaker Change: While most of our technology costs are highly correlated to our 11% system capacity and traffic growth.

Speaker Change: We're also steadily increasing our investments in technology as we focus on modernizing our systems transforming the way, we do business and upgrading our cyber security resilience.

Speaker Change: Well some of the increases related to the higher recurring license and cloud service costs.

We do experienced nonrecurring expenses for change management and cutover activities.

Speaker Change: The modernization of our technology stack will translate into a better airline.

John Di Bert: We will be more agile in planning our operations, enhanced customer experiences, capable of real-time optimization, and more secure for all stakeholders. And, of course, our investments will drive cost efficiencies as we grow. Maintenance expenses increased due to a higher level of flying year over year and a higher volume of engine maintenance events, which is largely a function of timing, including some summer readiness work that was completed in the quarter. Maintenance costs have also been affected by a higher rate of inflation for parts, components, and consumable supplies across the sector.

Speaker Change: Agile and planning our operations enhanced customer experiences capable of real time optimization and more secure for all stakeholders.

Speaker Change: And of course, our investments will drive cost efficiencies as we grow.

Speaker Change: Maintenance expense increased due to a higher level of flying year over year, and a higher volume of engine maintenance events.

Speaker Change: Which is largely a function of timing, including some summer readiness work that was completed in the quarter.

Speaker Change: Maintenance costs have also been affected by a higher rate of inflation for parts components and consumable supplies across the sector.

Speaker Change: Okay.

John Di Bert: The quarter demonstrated productivity and efficiency gains with FTE growth of 7% on 11% capacity expansion. Our labor productivity improvement should continue as we restore system-wide capacity to pre-pandemic levels and beyond. We expect sequential adjusted CASM improvements through Q2 and Q3, and we remain confident in the annual cost guidance we have issued. Let's start with free cash flow. Q1 free cash flow topped just over $1 billion compared to $987 million in the same quarter last year, including CapEx spend of $536 million.

Speaker Change: The quarter demonstrated productivity and efficiency gains with FTE growth of 7% on 11% capacity expansion.

Speaker Change: Our labor productivity improvement should continue as we restore system wide capacity to pre pandemic levels and beyond.

Speaker Change: We expect sequential adjusted CASM improvements through Q2 and Q3.

Speaker Change: We remain confident in the annual cost guidance, we have issued.

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

Speaker Change: Q1 free cash flow talk to just over $1 billion <unk>.

Speaker Change: Compared to $987 million in the same quarter last year.

Speaker Change: Including Capex spend of $536 million.

John Di Bert: Cash generation continues to be fueled by solid conversion of earnings to cash flow and seasonally positive working capital. Fleet additions in Q1 2024 included the delivery of one Boeing 787-9 Dreamliner and three leased A320s. One freighter entered into service, bringing the total active freighters to eight, a level that we will sustain for the foreseeable future.

Speaker Change: Cash generation continues to be fueled by solid conversion of earnings to cash flow and seasonally positive working capital.

Speaker Change: Fleet additions in Q1 2024 included the delivery of one Boeing 787 Dash nine Dreamliner and three leased 880 <unk> hundred <unk>.

Speaker Change: One frito entered into service, bringing the total active freighters to eight a level that we will sustain for the foreseeable future.

John Di Bert: All said, we're well on our way to generating significant free cash flow for full year 2024. With strong Q1 free cash flow, our balance sheet continues to strengthen, and we continue to make progress on total debt reduction. In the quarter, we significantly reduced our outstanding senior security indebtedness by almost $1.1 billion U.S. and increased available undrawn amounts under the revolving facility by $375 million. We have cut our net debt by nearly half since the end of the first quarter of 2022.

Speaker Change: All said, we're well on our way to generating significant free cash flow for full year 2024.

Speaker Change: With strong Q1 free cash flow our balance sheet continues to strengthen.

Speaker Change: And we continue to make progress on the total debt on total debt reduction.

Speaker Change: In the quarter, we significantly reduced our outstanding senior secured indebtedness by almost $1 $1 billion U S.

Speaker Change: And increased available undrawn amounts under the revolving facility by $375 million U S.

Speaker Change: We have cut our net debt by nearly half since the end of the first quarter of 2022.

John Di Bert: Having achieved our prior objective of below 1.5 net leverage, we will continue to look at gross debt reduction where it is economically favorable. Total liquidity was $10 billion at the end of Q1 2024. We've updated some of our full-year assumptions. We now anticipate that the Canadian dollar will trade on average at $1.35 per U.S. dollar and that the price of jet fuel will average $1.03 Canadian per liter.

Speaker Change: Having achieved their prior objective of below one five net leverage we will continue to look at gross debt reduction where it is economically favorable.

Speaker Change: Total liquidity was $10 billion at the end of Q1 2024.

Speaker Change: We've updated some of our full year guidance full year assumptions.

Speaker Change: We now anticipate that the Canadian dollar will trade on average at $1 35 per U S dollar and that the price of jet fuel will average $1 three Canadian per leader.

John Di Bert: Note that in April, we decided to hedge roughly 50% of our projected fuel consumption for the second quarter. We remain confident in our ability to deliver on our plans and are reiterating our full year guidance for capacity, adjusted chasm, and adjusted EBITDA. As a reminder, we are targeting capacity growth of 6 to 8%. We expect our adjusted CASM to increase between 2.5 and 4.5% over 2023, and our yearly adjusted EBITDA to be between $3.7 and $4.2 billion. In the coming months, we expect to welcome another 787-9 aircraft, 28330-300, and 8 to 20.

Speaker Change: Note that in April we have decided to hedge roughly 50% of our projected fuel consumption for the second quarter.

Speaker Change: We remain confident in our ability to deliver on our plans and are reiterating our full year guidance for capacity adjusted CASM and adjusted EBITDA.

As a reminder, we.

We're targeting capacity growth of 6% to 8%.

Speaker Change: Next our adjusted CASM to increase between two 5% and four 5% over 2023.

Speaker Change: Our yearly adjusted EBITDA to be within three seven and $4 2 billion.

Speaker Change: In the coming months, we expect to welcome another 787 dash nine aircrafts.

Speaker Change: <unk> hundred <unk> dash, three hundreds and two 8% <unk>.

John Di Bert: We remain in a tight capacity environment and are putting in place various measures to secure additional lift. To this end, we are in the process of arranging these agreements for some additional Boeing 737 MAX 8, which would be scheduled for delivery in 2024 and entered into service in 2025 upon the completion of their reconfiguration. Our fleet commitments for the next few years are detailed in our disclosures. Looking further out into the decade, we believe that we are poised to capture structural growth in our key markets driven by immigration trends. The Continued Evolution of Our Sixth Freedom Franchise, higher propensity to travel and a growing Canadian population

Speaker Change: We remain in a tight capacity environment and are putting in place various measures to secure additional lift.

Speaker Change: To this end we are in the process of arranging these agreements or some additional Boeing 737, Max eights.

Speaker Change: That would be scheduled for delivery in 2024.

Speaker Change: And enter into service in 2025 upon the completion of their reconfiguration.

Speaker Change: Our fleet commitments for the next few years are detailed in our disclosures.

Speaker Change: Looking further out into the decade, we believe that we are poised to capture structural growth in our key markets driven by immigration trends with.

The continued evolution of our sixth freedom franchise.

Speaker Change: Behavioral higher propensity to travel and.

Speaker Change: A growing Canadian population.

John Di Bert: We remain focused on having the right fleet in the right place to capitalize on our opportunities. As we add capacity to our fleet, you can expect a balance of mixed and leased and owned aircraft additions. As time progresses, we will look to put in place various financing structures as appropriate. However, our overarching guideposts will remain a net leverage ratio of approximately 1.5, and strong liquidity. Consistent Free Cash Flow Generation and a more historically reflective leased versus owned fleet

Speaker Change: We remain focused on having the right fleet in the right place to capitalize on our opportunities.

Speaker Change: As we add capacity to our fleet you can expect a balanced of mixed and leased owned leased and owned aircraft additions.

Speaker Change: As time progresses, we will look to put into place various financing structures as appropriate.

Speaker Change: Our overarching overarching guidepost will remain a net leverage ratio of approximately $1 five.

Speaker Change: Strong liquidity.

Consistent free cash flow generation.

Speaker Change: And a more historically reflective leased versus owned fleet.

John Di Bert: We are confident that continued solid execution, capitalizing on our strength, and supporting our growth are creating value for all stakeholders. With a full recovery of our financial foundation, further evidenced by our credit rating upgrades at S&P and Moody's, and with our capacity approaching our prior peak levels, we are now well in position to support investments in growth and consider initiatives to directly reward shareholders. Thank you, and back to you, Mike.

Speaker Change: We are confident that continued solid execution.

Speaker Change: Capitalizing on our strengths and supporting our growth.

Speaker Change: Creating value for all stakeholders.

With a full recovery of our financial foundation further evidenced by our credit rating upgrades at S&P, and Moody's and with our capacity approaching our prior peak levels.

Speaker Change: We are now well positioned to support investments in growth and consider initiatives to directly reward shareholders.

Speaker Change: Thank you and back to you Mike.

Mike: Thank you John.

Michael Stewart Rousseau: A strong first quarter performance reporting day shows Air Canada remains on track to deliver strong annual results. However, our ambitions far exceed this achievement; we intend to grow our airline profitably, improve our product offering, drive continuous operational efficiency, and create greater long-term value for our investors and all stakeholders. And to do so, we will remain disciplined with respect to risk and financial management, ensuring a responsible approach to cost control and capital allocation so that we have the means to fund our future.

Mike: Our strong first quarter performance, we're reporting today shows Air Canada remains on track to deliver strong annual results.

Mike: Over our ambition as far exceed this achievement, we intend to grow our airline profitably improve our product offering drive continuous operational efficiency and create greater long term value for our investors and all stakeholders.

And to do so we will remain disciplined with respect to the risks and financial management, ensuring a responsible approach to cost control and capital allocation. So that we have the means to fund our future.

Michael Stewart Rousseau: Our strong balance sheet will serve as a foundation on which we will continue to grow our airline through investments in our world-class global network and capital allocation strategies. And, as we said in previous calls, we do not simply manage quarter-to-quarter. Instead, we maintain a long-term outlook when making investments and strategic decisions. Our strong and proven focus on effective financial management gives us much needed flexibility to plan and ensure we have the resources to deliver on those long-term plans. A good example is Fleet Planning.

Mike: Our strong balance sheet will serve as a foundation on which we will continue to grow our airline through investments in our world class Global network and capital allocation strategies.

Mike: And as we said in previous calls, we do not simply manage quarter to quarter. Instead, we maintain our long term outlook, when making investments and strategic decisions.

Mike: Our strong improving focus on effective financial management gives us much needed flexibility to plan and ensure we have the resources to deliver on those long term plans.

A good example of fleet planning.

Michael Stewart Rousseau: As John alluded to, given today's extended aircraft development, ordering, and manufacturing cycles, we must look years ahead when making these decisions. This also requires anticipating changes to technology, market demand, and even customer preferences so that we remain ahead of our competitors. From there, it is a short step to our next priority of expanding our network. We make no secret of our determination to reach new frontiers, such as the launch last month of our new Vancouver-Singapore route. This event was followed shortly by our ambitious summer schedule release, which features other new services already mentioned by Mark.

Mike: As John alluded to given today's extended aircraft development ordering and manufacturing cycles. We must look years ahead, when making these decisions.

Mike: This also requires dissipating changes technology market demand and even customer preferences. So that we remain ahead of our competitors.

Mike: From there it is a short step to our next priority of expanding our network make no secret of our determination to reach new frontiers, such as the launch last month of our new Vancouver, Singapore Route.

Mike: This event was followed shortly by our ambitious summer schedule release, which features other new services already mentioned by Mark.

Michael Stewart Rousseau: And we see many opportunities ahead. There is also sustained demand for leisure travel from retiring baby boomers, established Gen Xers, and the Millenniums and Gen Z cohorts eager to explore, all of which are growth segments within AeroPlan as well. The plan is to reach these markets and those fueled by immigration, and we will do so through our own growing network and the networks of our Star Alliance and other partners, such as Emirates, which reach deeply into regions we presently do not serve.

Mike: And we see many opportunities ahead.

Mike: There is also a sustained demand for leisure travel from retiring baby Boomers established Gen xers.

Mike: And the millenniums and Janet Gen Z cohorts eager to explore all of which are growth segments within Aero plan as well.

Mike: We plan to reach these markets and those fuelled by immigration.

Mike: And we will do so through our own growing network and our networks of our Star Alliance and other or other partners, such as Emirates, which reach deeply into regions. We presently do not serve.

Michael Stewart Rousseau: Another important way we're capturing demand is through our Air Canada Vacations. We intend to continue enhancing these products to provide even more compelling leisure travel options. Meeting the needs of all customers brings us to our next priority of elevating the customer experience. We are in the midst of a multi-year program to simplify, enhance, and add value to each customer's journey. This includes our ever-improving onboard entertainment system and high-speed in-flight connectivity. Our IFE system has won rave reviews from customers and industry awards, including the 2024 Apex Best in Entertainment Award in North America this past quarter. In March, we further elevated the customer experience with a comprehensive upgrade of our award-winning menus featuring more than 100 new rotating seasonal recipes, snacks, and new beverages.

Mike: Another important layer of capturing demand through our air Canada vacations, we intend to continue enhancing our products to provide even more compelling leisure travel options.

Mike: Meeting the needs of all customers brings us to our next priority of elevating the customer experience.

Mike: We are in the midst of a multi year program to simplify enhance and add value to each customer's journey.

Mike: This includes our ever improving onboard entertainment system and high speed in flight connectivity.

Mike: Our <unk> system has one rare rare rave reviews from customers and industry awards, including the 2020 for Apex Best Entertainment Award in North America This past quarter.

Mike: In March we further elevated the customer experience with a comprehensive upgrade of our award winning menus with more than 100, new rotating seasonal recipes snacks and beverages.

Michael Stewart Rousseau: Another major driver of customer choice and loyalty is AeroPlan. Our active member base has more than doubled since we relaunched the program in 2020. Revenues from air travel redemptions grew 6% from the first quarter of 2023. Gross buildings were up 10%, and its growth outpaced the competition with expanded credit card market share.

Mike: Another major driver of customer choice loyalties aeroplan.

Mike: Our active member base has more than doubled since we relaunched the program in 2020 Rep.

Mike: Revenues from Air travel redemptions grew 6% from the first quarter of 'twenty three.

Gross billings were up 10% and its growth outpaced the competition with expanded credit card market share.

Michael Stewart Rousseau: Much of this success is due to strong partnerships with marquee everyday brands. In January, we celebrated our 10th anniversary with one of our anchor partners, Toronto Dominion Bank. And this longevity speaks to the loyalty of the program, to our customers, and to our partners. We continue to gain market share with the program and see exciting opportunities ahead. Another important group of customers are the ones that we are innovating to serve better is the freight forwarding community that uses Air Canada cargo. Like HEV and aeroplanes, Air Canada cargo is an important element of Air Canada's revenue diversification strategy.

Mike: Much of the success is due to the strong partnerships with marquee everyday brands.

Mike: January we celebrated our 10th anniversary with one of our anchor partners trying with Dominion Bank.

Mike: And this long longevity speaks to the loyalty program to our customers into our partners.

Mike: We continued to gain market share with the program and see exciting exciting opportunities ahead.

Mike: Another important group of customers or the debt.

Mike: That we are innovating.

Mike: To serve better is the freight forwarding community that uses air Canada cargo like ACD and Aeroplan Air Canada cargo is an important element of air Canada's revenue diversification strategy.

Michael Stewart Rousseau: In January, Air Canada Cargo was named the 2024 Cargo Operator of the Year in the 50th Annual ATW Airline Industry Achievement Award. We are the first Canadian operator to win the award. In doing so, ATW cited Air Canada Cargo's digital transformation, which it said created a customer-centric digital environment.

Mike: The January Air Canada cargo was named the 2024 cargo operator of the year and the 15th annual ITW airline industry Achievement Awards, we were the first Canadian operator to win the award and doing so Acw decided air Canada Cargo's digital transformation that has created a customer centric digital environment.

Michael Stewart Rousseau: Our final priority relates to our people, and because our people enact all other priorities, we know we must lift each other up. Our people are highly motivated, and we work hard to support them in their jobs and to ensure we continually attract the best talent. For this reason, we're proud to be among the winners of the 2024 Montreal Top Employer Awards in February. This is the 11th consecutive year we have won this award.

Mike: Our final priority relates to our people and because our people in that all other priorities. We know we must have the fee each other up.

Mike: Our people are highly motivated and we worked hard to support them in their jobs and to ensure we continually attract the best talent.

Mike: For this reason we are proud to be among the windows of the 2024, Montreal as top employer awards in February. This is the 11th consecutive year. We have won this award.

Michael Stewart Rousseau: Efforts from around the company combine to drive our brand to new heights. Air Canada had the strongest performance improvement on Ipsos' most influential brands in Canada rankings released during the quarter, moving from 78th place to 38th place in just one year.

Efforts from around the company accumulate to drive our brand to new Heights.

Mike: Air Canada had the strongest performance improvement on Ipsos, most influential brands in Canada rankings released during the quarter moving from 78 place to 38 place in just one year.

Michael Stewart Rousseau: As citizens of the world, our work regarding ESG initiatives continues, with strong environmental and social programs supported by sustained community investment. We remain committed to making strategic decisions and investments that will yield benefits for everyone far into the future. We have the people, the plan, and the resources to realize our ambitions, and we fully intend to consistently perform and meet or exceed the goals we have set for ourselves. And with that, I'll be pleased to take questions. It's over to you, Valerie.

Mike: As citizens of the World our work regarding ESG initiatives continues with strong environmental and social programs supported by sustained community investments.

Mike: We remain committed to making strategic decisions and investments that will yield benefits for everyone far into the future.

Mike: We have the people the plan and the resources to realize our ambitions and we fully intend to consistently before that and meet or exceed the goals we have set for ourselves.

Mike: And with that we'd now be pleased to take questions over to you Bill.

Valérie Durand: Thank you, Mike, and thank you all for joining us this morning. Nous vous remercions de votre grand intérêt ce matin.

Bill: Thank you Mike and thank you all for joining US this morning, and put them on Sunday, we had content that SMIC. We're now ready to take your questions should you require further details. Following this call our investor Relations team is available for support back to using Yang.

Valérie Durand: We're 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, Juliane.

Operator: Thank you, Valerie. As a reminder, to ask a question, please press star followed by the number one on your telephone keypad. In the interest of time, we ask that you please limit yourselves to one question and one follow-up question. Thank you. Our first question will come from Savvy Sith on behalf of Raymond James. Please go ahead, your line is open.

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

Speaker Change: Joseph time, we ask that you. Please limit yourself to one question and one follow up question. Thank you.

Speaker Change: First question will come from Savi <unk> from Raymond James. Please go ahead. Your line is open.

Savvy Sith: Hey, good morning everyone. I wonder if you could talk a little bit more about the Transporter. I know you mentioned making investments there and growing, and it seems like you're seeing a lot of competitive capacity in those markets as well. So I wonder if you could provide just a little bit more color on what you're seeing in those markets and how, maybe, the competitive capacity is playing out there.

Savi: Hey, good morning, everyone.

Savi: I Wonder if you could talk a little bit more about the transporter I know you mentioned.

Savi: Making investments there and growing and it seems like Youre seeing a lot of competitive capacity in those markets as well. So I wonder if you could provide just a little bit more color on what youre seeing in those markets and connect.

Savi: Maybe the competitive capacities.

Savi: Okay.

Mark Galardo: Sure. Hi Savi.

Sure Hi, Savi.

Speaker Change: We look at the transporter market market, there's a couple of.

Speaker Change: Submarkets in there you've got the traditional business markets yet in major metro areas in the U S. And then you've got also very strong leisure Sun focused element as well when we look at that market. So on the on the Canada U S sector in terms of transporter.

Mark Galardo: When we look at the transborder market, there are a couple of, you know, sub-markets in there. You've got, you know, the traditional business markets, you know, to major, you know, metro areas in the U.S. And then you've got also very strong leisure, sun-focused, you know, elements as well when we look at that market. So in the Canada-U.S. sector, in terms of transborder, you know, we're definitely growing our capacity, increasing the amount of frequency and new routes that we're offering.

Speaker Change: Definitely growing our capacity.

Increasing amount of frequency in new roads that were offering and like we said this is more long term in nature.

Mark Galardo: And like we said, this is more long-term in nature, especially as we build up our international network and Six Freedom Admissions. You know, we like what we see in terms of, you know, our ability to execute but also drive, you know, six feet in revenue. On the leisure side or the sun market, you know, it has been more competitive this winter. You know, we have seen Canadian carriers move capacity into traditional markets like, you know, Florida, Arizona, California, etc. And, you know, we're in a little bit of a difficult market this winter compared to last year, but demand remains strong. And, you know, we're happy with our performance there.

Speaker Change: As we build up our international network and sixth freedom admissions.

Speaker Change: We like what we see in terms of our ability to execute but also drive significant revenue.

Speaker Change: The leisure side or the Sun market. It has been more competitive this winter.

Speaker Change: We have seen Canadian carriers move capacity into traditional markets, like Florida, Arizona, California et cetera.

Speaker Change: And.

Speaker Change: That market is a little bit sort of difficult this winter compared to last year, but still demand remains strong and we are happy with our performance there.

Mark Galardo: That's helpful. And Mark, maybe I can also ask just what you're seeing on the kind of business recovery side, you know, some of the US airlines have talked about seeing a step up in large corporate demand, and I'd be curious what you're seeing in it and how it compares either year over year or relative to 2019.

Speaker Change: That's helpful Mark.

Mark: Maybe I can also ask just what youre seeing on the kind of the business recovery side. Some of the U S Airlines talked about seeing a step up in large corporate demand and Im curious what youre seeing in and how it compares either year over year or relative to 2019.

Mark Galardo: Yeah, good question. So in Q1, it was relatively stable. We didn't see as much growth as some of our American peers did, but as we look late into the quarter and into Q2, we're starting to see some very encouraging signals on corporate demand, to the tune of almost 10 to 20% greater on a year-over-year basis. You know, it's a little bit early to spike the ball on that, but we're seeing some very, very strong signals.

Mark: Yeah. Good question. So in Q1, it was relatively stable we didn't see a big growth as some of our American peers did but as we look late into the quarter and into Q2, we're starting to see some very encouraging signals a corporate demand.

Mark: To the tune of almost 10% to 20% greater on a year over year basis.

Mark: It's a little bit early to spike the ball on that but we're seeing some very very strong signals, but it's also the composition of who is traveling and in Q1 and early to Q2, we're starting to see the emergence of the tech sector traveling again.

Mark Galardo: But it's also the composition of who's traveling, and in Q1 and early to Q2, we're starting to see the emergence of the tech sector traveling again, you know, the transportation sector, which is a very, very good sign for, you know, a rebuild on the corporate demand side.

Transportation sector.

Mark: Which is very very good sign for rebuild on the on the corporate demand side.

Speaker Change: Very helpful. Thank you.

Christopher Allan Murray: Our next question comes from Chris Murray from ATB Capital Markets. Please go ahead. Your line is open.

Speaker Change: Our next question comes from Chris Murray from <unk> Capital markets. Please go ahead. Your line is open.

Christopher Allan Murray: Thanks, folks, good morning. Um, if I can go back maybe a little bit to the comment about, you know, maybe putting together capacity constraints and some of the comments around, you know, alliances and STAR, or maybe A++. I'm sure you've been looking at this, but is there anything on the regulatory front that you could think of, or any other opportunities you could see that would maybe create some more capacity for either transborder or internationally with some of your partners, because I think everybody's facing some of the other challenges that you guys are seeing with being able to find lift at this particular point.

Christopher Allan Murray: Hi, good morning.

Christopher Allan Murray: If I can go back maybe a little bit to the comment about maybe putting together capacity constraints in some of the comments around alliances.

Christopher Allan Murray: Alliances and star.

Christopher Allan Murray: Or maybe a plus plus.

Christopher Allan Murray: I'm sure you've been looking at this but is there anything on the regulatory front that you can.

Christopher Allan Murray: Could think of or any other opportunities you could see that would maybe create some more capacity for either trans border or internationally with some of your partners because I think everybody is facing some of the other challenges that you guys are seeing with with being able to find lift at this particular point.

Mark Galardo: Timely question, Chris, because we've got a very robust and strong relationship with United. And, in fact, United Airlines this summer is going to do a lot of flying, a lot of additional service between Canada and the U.S., whether it be to our hub cities or even to secondary cities in Canada, like Winnipeg or Ottawa, for example. So we've definitely had our JV peers step up and certainly help us on the capacity front.

Speaker Change: Timely question, Chris because we've got a very robust and strong relationship with United and in fact, United Airlines. This summer to do a lot of a lot of flying a lot of additional service between Canada and the U S.

Speaker Change: Whether it be to our hub cities or even to secondary cities in Canada like like a Winnipeg or an auto for example.

Speaker Change: So we've definitely had our JV.

Speaker Change: <unk> step up and certainly help us on the capacity front in fact, just last week.

Mark Galardo: In fact, just last week, United announced a new Montreal-San Francisco flight that complements our existing service. So we're definitely in coordination with our JVs to make sure that, you know, from a JV perspective, we've got capacity that we can use.

Speaker Change: <unk> announced a new Montreal, San Francisco flight that complements our existing service. So we are definitely in coordination with our JV is to make sure that from a JV perspective, we've got the capacity that we need.

Mark Galardo: And is there anything like, I think we've talked about a Pacific JV or something like that, anything like that on the horizon that you think would help?

Speaker Change: And is there anything there.

Speaker Change: Talked about the Pacific JV or something like that or anything like that on the horizon that you think would help.

Mark Galardo: We're always looking at what the options are, but for now, we've got a very strong partnership with ANA, with our partner CAFE, we have a joint venture with Air China. Obviously, we know that Chinese demand is a little bit subdued at the moment, but we're always assessing what new partnerships might look like in that part of the world.

Speaker Change: We're always looking at what the options are but for now we've got a very strong partnership with <unk>.

Speaker Change: With our partner Cafe, we have a joint venture with Air China, Obviously, we know that the Canada, China demand is a little bit subdued at the moment.

Speaker Change: But where we're always assessing what new partnerships might look like in that part of the world.

Christopher Allan Murray: That's helpful. Um, my other question, and I'm not sure who wants to take this. I mean, certainly, we've seen the commentary around, um, the accruals you've made for employee costs. Um, I guess we're getting closer and closer to, uh, the drop-dead date in our discussions with the pilots. Can you just provide us with, uh, some color and some update on how the process is going and what we should be looking for as next steps?

Speaker Change: Alright Thats helpful.

Speaker Change: My other question and I'm not sure who wants to take this I mean, certainly we've seen the commentary around the accruals for employee costs.

Speaker Change: I guess, we're getting closer and closer to our to the drop dead date and discussions on the pilots can you just provide us some color on some update on how the process is going and what we should be looking forward to next steps.

Michael Stewart Rousseau: Hey, good morning, Chris, and Mike. So, I don't think there's any drop-dead date. First of all, we're in discussions with our pilots with the help of a mediator at this point in time, and that process continues, and we're going through it. Many elements are making progress. But again, that process will continue for at least the next little while, and then we'll determine. Yeah, then we'll hopefully come to an agreement. (inaudible)

Speaker Change: Hey, good morning, Chris Mike.

Speaker Change: Yes.

Speaker Change: So I don't think Theres any drop dead date for.

Speaker Change: First of all we're in discussions.

Speaker Change: With our pilots with the help of a mediator.

Speaker Change: Wait in time and that process continues and we're going through.

Speaker Change: Many elements and making progress.

Speaker Change: But again that.

Speaker Change: Our process will continue.

Speaker Change: At least for the next.

Speaker Change: The next little while and then we will determine.

Speaker Change: Then we will hopefully will come to an agreement.

Speaker Change: Is that process winds up.

Christopher Allan Murray: Okay, I'll leave it there. Thank you, folks.

Speaker Change: Okay I'll leave it there thank you folks.

Operator: Our next question comes from Andrew Didora from Bank of America. Please go ahead, your line is open. Hi, good morning, everyone. Just wanted to touch on the other revenue line item that kind of decelerated more sharply than you kind of saw throughout.

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

Andrew George Didora: Hi, good morning, everyone. I just wanted to touch on the other revenue line item kind of decelerated more sharply than you kind of saw throughout last year, barely showing any growth year over year in one queue. Is it credit cards? You know, are you seeing any change in terms of consumer behavior in that product? Or is there something else going on in that line item? Sure. Hey, it's Mark Nasr. Good morning.

Andrew: Hi, good morning, everyone.

Andrew: Wanted to touch on the other revenue line item.

Andrew: Decelerated more sharply than the kind of soft throughout last year barely showing any growth year over year in <unk>.

Andrew: Is this credit cards are you seeing any change in terms of consumer behavior in that product or is there something else going on in that line item.

Mark Youssef Nasr: No issues with credit cards. In fact, we've seen the growth in our portfolio outpace the market in Canada and, for the first time in several years, an increase in our overall share of credit card spend in Canada. So no issues there. I guess what was the driver of kind of basically no growth in one queue after, you know, several quarters of double-digit growth there? It just seemed like an outlier compared to our estimates.

Andrew: Sure Hey, it's Mark now Sir good morning.

Mark: No issues of credit cards in fact, we've seen the growth on our portfolio outpaced market in Canada and for the first time in several years, an increase in our overall share of credit card spend in Canada.

Mark: So no issues there.

Mark: Okay.

Speaker Change: I guess, what was the driver of kind of basically no growth in <unk>. After several quarters of double digit growth there and it just seemed like an outlier versus our estimates.

Mark Youssef Nasr: Yeah, we'll have to get back to you on that one. I think it's, you know, we haven't picked up anything that's non-performing yet.

Speaker Change: We will have to get back to you on that one I think it's.

Speaker Change: We do we haven't picked up anything Thats nonperforming.

Speaker Change: Nonperforming so.

John Di Bert: Lastly, just for me, John, I think you mentioned in your remarks that CASM-X would improve sequentially. Was that a comment on an absolute CASM sense figure or a CASM growth figure year over year? Yeah, so it's a sequential order.

Speaker Change: Okay.

Speaker Change: Lastly, just from me John I think you mentioned in your remarks that CASM ex would improve sequentially was that a comment on absolute CASM since figure or a CASM growth figure year over year. Thanks.

John Di Bert: Yeah, so it's a sequential quarter. So we'll see good, we'll see continued improvement in CASM. Obviously, we continue to grow capacity through the year, and we get good efficiency. But year over year, you'll see some pressure. Last year, Q2, Q3, we had double digit sequential quarters there. I think we grew Q1 to Q2, and 23 was 11%, if I'm not mistaken, and Q2 to Q3 was almost 15% quarter over quarter growth.

Speaker Change: Yes, so it's a sequential quarters, so we will see good.

Speaker Change: We will see good continued improvement in CASM is obviously, we continue to grow capacity through the year and we get good efficiencies year over year, you'll see some pressure last year.

Speaker Change: Q2, Q3, we had double digit sequential quarters. There I think we grew Q1 to Q2 and 23 was 11% if I'm not mistaken in Q2 to Q3 was almost 15%.

John Di Bert: So the improvements last year, we probably won't match this year, but we still feel pretty good about how we're making progress. And I think we're starting to see the benefits just of that early scale up in 22, 23. And now we're starting to get back a little bit of productivity. We did see some in the first quarter, and we still feel pretty good about the full year guide at two and a half to four and a half.

Speaker Change: We're over quarter growth. So the improvements last year, we probably won't match this year, but we still feel pretty good about how we're making progress and I think we're starting to see the benefits of that.

Speaker Change: That early scale up.

Speaker Change: In 'twenty two 'twenty three and now are sent to give back a little bit of productivity. We did see some here in the first quarter and we still feel pretty good about the full year guide at two five to four and a half.

Speaker Change: Okay. Thank you.

Operator: Our next question comes from Matthew Lee from Canaccord Genuity. Please go ahead; your line is open.

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

Matthew James Lee: Good morning, nice to take my question. I wanted to maybe start with headcount. It looks like you added another 500 employees to the staff this quarter. Can you maybe talk about where those people are being deployed and whether we should expect to see further FTE growth as we go deeper into the year?

Matthew James Lee: Hey, good morning, Thanks for taking my question I wanted to maybe start with head count. It looks like you added another 500 employees stop this quarter can you maybe talk about where those people are being deployed and whether we should expect to see further FTE growth as you go deeper into the year.

John Di Bert: No, so we I mean we typically do add some some staffing at the beginning of the year and you know we continue to have another year that's going to be some pretty decent growth as you know six to eight percent so staffing is basically operational focused and I would say you know probably a little bit of IT folks as well in there as we are stacking up some of the technology improvements overall I would say that we're seeing a good gap between the capacity growth and our FTEs in the quarter I think eleven percent of capacity on seven percent staffing and I think that continues to get better through the year and probably into next year as well I think that there's probably you know a couple of years here we're going to start to get better efficiencies the airline works better at a certain scale and we're coming back to a 19 levels and then from there we should continue to see good benefits

Matthew James Lee: So we I mean, we typically do add some.

Matthew James Lee: Staffing at the beginning of the year and we continue to have another year, that's going to be some pretty decent to growth as you know 6% to 8%.

Matthew James Lee: So staffing has been basically operational focus.

Matthew James Lee: I would say probably a little bit of it folks as well and there is we are stacking up some of the technology improvements.

Matthew James Lee: Overall, I would say that we're seeing a good gap between the capacity growth in our ftes in the quarter I think.

Matthew James Lee: 11% of capacity on 7% staffing and I think that continues to get better through the year and probably into next year as well I think that theres probably.

Matthew James Lee: A couple of years here, where we're going to start to get better efficiencies. The airline works better in a certain scale and we're coming back to a 19 levels and then from there we should continue to see good benefits.

Matthew James Lee: Okay, great. And then maybe, you know, you mentioned a 30% increase in Pacific travel for the summer and a 25% increase in certain European locations. Just given that overall capacity is kind of scheduled to be high single digits for the year, can you help us understand which areas are taking capacity from and maybe whether those routes were underperforming or, you know, if they'll be back once deliveries come in?

Speaker Change: Okay, Okay, great and then maybe.

Speaker Change: Mentioned that 30% increase in Pacific travel this summer at 25% increase in certain European locations.

Speaker Change: Just given the overall capacity is scheduled to be high single digits for the year can you help us understand which areas are taking capacity problem.

Speaker Change: And maybe whether those routes were underperforming or FW back when silver grades come in.

John Di Bert: I'll give you some quick color and then Mark can add here, but late last year we made the decision to reposition some of our transatlantic fleet to the Trans-Pacific. And so that's really what's driving and fueling that growth, the Trans-Pacific. I mean, it was an opportunity for us to tap into a market that was underserved, and it also produced very good yields. So it's very planned growth in the Pacific and was not a reaction. It was actually a strategy for 2024.

Speaker Change: I'll take a quick using.

Speaker Change: Some quick color on end market and out here, but.

Speaker Change: Late last year, we made the decision two three.

Speaker Change: <unk> repositioned some of our Trans Atlantic fleet to the transpacific and so that's really what's driving and fueling that growth Trans Pacific I mean, it was an opportunity for us too.

Speaker Change: This happened to a market that was underserved and it also produces a.

Speaker Change: Very good yield so.

Speaker Change: It's a very planned.

Speaker Change: Growth in the Pacific and was not a reaction was actually a strategy for 2024.

Matthew James Lee: Okay, great. I'll pass the line.

Speaker Change: Okay, Great I'll pass the line.

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

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

Helane Renee Becker: Thanks very much, Operator. Hi team.

Helane Renee Becker: Thanks, very much operator, hi team thanks for the time.

Helane Renee Becker: Two questions. One on liquidity you mentioned there was $10 billion at the end of the quarter what does that actually now can you can you say.

Helane Renee Becker: Thanks for the time. Two questions. One, on liquidity, you mentioned it was $10 billion at the end of the quarter. What is it actually now? Can you say, Air Canada?

John Di Bert: I mean, not materially changed. I mean, we, you know, as you know, in Q1, we took down some debt. So we did use some there, we added some capacity to our revolver. So that would have added some liquidity, about 375 US. We continue to have

Helane Renee Becker: Not materially changed.

Helane Renee Becker: <unk>.

Helane Renee Becker: As you know in Q1, we took down some debt. So we did use some there we added some capacity to our revolver. So that would have added.

Helane Renee Becker: Some.

Helane Renee Becker: Some liquidity of about 375 U S.

Helane Renee Becker: We continue to have very strong liquidity position, so nothing really to comment very different than the Q Q1 end of period was.

Helane Renee Becker: Okay, that's very helpful. And then the other thing in the MD&A, you talked about, and you just mentioned it as well, lower yields and long-haul transatlantic routes. And we're kind of curious about that statement. I know you were wondering about declining yields, I sort of didn't get that from your prepared remarks.

Speaker Change: Okay. That's very helpful. And then the other thing in the end.

Helane Renee Becker: DNA <unk>.

Helane Renee Becker: Talk about and you just mentioned it as well lower yields and long haul Trans Atlantic routes and we're kind of curious about that statement.

Helane Renee Becker: No.

Helane Renee Becker: And just wondering about.

Helane Renee Becker: About declining yields.

Helane Renee Becker: Did I get that from your prepared remarks.

Mark Galardo: Yeah, Helane, a very good point. On the Trans-Atlantic, it's important to know; it's about the comparison. And last year, on the Trans-Atlantic, we had a very, very robust environment. And it was normal to expect that we'd have some kind of decline on the Trans-Atlantic, given the normalization that we're seeing. Well, from a profitability perspective, we're very pleased with what we see on the transatlantic. And as you know, this is one of the sectors that really drives our airline forward. So although we're seeing some yield declines, it's expected, and you know, the transatlantic market, in general, is quite resilient. And we're seeing, year over year, that demand continues to trend favorably. So there are no major issues there.

Speaker Change: Yes Hello.

Speaker Change: Very good very good point on the Trans Atlantic to point to note. It's about the compares and last year on the Trans Atlantic We had a very very robust environment.

Speaker Change: And it was normal to expect that we'd have some kind of decline on the trans Atlantic given the normalization that we're seeing but from a profitability perspective, we're very pleased with what we see on the Trans Atlantic and as you know. This this is one of the sectors that really drives our airline forward. So although we're seeing some yield declines.

Speaker Change: As expected and the transatlantic market in general is quite resilient and we're seeing year over year that demand continues to trend favorably. So.

Speaker Change: No major issues there.

Helane Renee Becker: Okay, that's very helpful. Thanks, team.

Speaker Change: Okay. That's very helpful. Thanks, Tim.

Speaker Change: Thank you.

Operator: Our next question comes from Jamie Baker from J.P. Morgan. Please go ahead. Your line is open.

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

Jamie Nathaniel Baker: Oh, hey, good morning, everybody. I'm following up on Savi's corporate question. So are you seeing any differences, you know, relative to pre-COVID in terms of corporate booking patterns, you know, for example, trip duration, how far in advance, you know, bookings are taking place, that sort of thing? And also, if it is too early to spike the ball, your term, do you think that corporate ends up being the variable that, you know, in the event you exceed your revenue ambitions for the year? Do you think that's going to be the category on the upside, you know, to the model?

Jamie Nathaniel Baker: Oh, Hey, good morning, everybody I'm following up on zombies corporate question. So are you seeing any differences.

Jamie Nathaniel Baker: Relative to pre Covid in terms of corporate booking patterns for example trip duration how far in advance.

Jamie Nathaniel Baker: Bookings are taking place that sort of thing and also if it is too early to spike the ball near term.

Jamie Nathaniel Baker: Do you think that corporate ends up being the variable that in the event you exceed your revenue ambitions for the year do you think that's going to be the category the upside to the model.

Mark Galardo: Hi Jamie, it's Mark. So we're not assuming that just yet. We want to see a few more months of that trend, you know, being positive. But again, in Q1, we saw corporate demand to and from the U.S. rise year over year to the tune of almost... 10%. Transcripts provided by Transcription Outsourcing, LLC.

Jamie Nathaniel Baker: Hi, Jamie its mark so we're not assuming that just yet we want to see a few more months of that trend being positive.

Mark: But again in Q1, we saw corporate demand to and from the U S rise year over year to the tune of almost 10%.

Mark: Demand within Canada was relatively flat.

Jamie Nathaniel Baker: Again, we're very bullish and favorable on the U S prospects. So if we see a few more months of this that might change your view of the year, but for now we're not.

Speaker Change: Not materially changing our assumptions got it.

Jamie Nathaniel Baker: Got it. And then second, probably for Mike, you know, a theme that's been coming up with at least two of the U.S. airlines relates to competitive moats that they believe exist around their business. So what do you think are Air Canada's most important moats? I certainly have my opinions. I just want to hear if mine align with yours, which is why Matt's in the question. Thanks in advance.

Jamie Nathaniel Baker: And then second probably for Mike a theme that's been coming up with at least two of the U S Airlines.

Jamie Nathaniel Baker: <unk> two competitive moats that they believe exist around their business.

Mike: So what do you think our air Canada as most important mode. I certainly have my opinions I just wanted to hear if mine align with yours, which is why I'm asking the question. Thanks Vince.

Michael Stewart Rousseau: Well, we could spend the rest of the time on what we think our competitive strengths are, but certainly our diversification, our international franchise, our partnerships that we have in place. You know, the strength of our three key hubs and the ability that we sit on top of the largest travel market and are able to attract traffic. Plus, the efficiency of our fleet. I know we have different types of planes in our fleet, Airbus and Boeing, but we believe we have a very, very efficient fleet, and with our fleet plans going forward, it should become even more efficient.

Mike: We could spend the rest of the timeline on what we think our competitive strengths are but certainly our diversification our international franchise.

Vince: Our partnerships that we have in place.

Speaker Change: The strength of our three key hubs.

Speaker Change: And the ability that we sit on top of the largest travel market and are able to attract traffic.

Vince: Plus the efficiency of our fleet.

Vince: No.

Vince: We have different <unk>.

Vince: The planes that are in our fleet Airbus and Boeing.

Vince: But we believe we have a very very efficient fleet and with our fleet plans going forward it will become even more efficient.

Jamie Nathaniel Baker: Okay, that's a differentiated aspect. I appreciate that.

Speaker Change: That's a differentiated aspect I appreciate that.

Michael Stewart Rousseau: And there are other aspects as well. With our onboard product, our LOPA, we run a very efficient airline that can meet the needs of many, many different customers.

Speaker Change: Absolutely.

Speaker Change: There are other aspects as well.

Speaker Change: You know our onboard product are low power.

Speaker Change: We run a very efficient airline that.

Speaker Change: Can meet the needs of many many different customers.

Jamie Nathaniel Baker: Got it. Thank you very much.

Speaker Change: Got it thank you very much.

Speaker Change: Okay.

Operator: Our next question comes from Stephen Trent from Citi. Please go ahead; your line is open.

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.

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

Stephen Trent: The first question pertains to regulation, what we've seen here in the U S is the deal.

Stephen Trent: Looking like it wants to impose strict curious for.

Stephen Trent: Flights that are delayed.

Stephen Trent: Lost bags cancel flights and what have you.

Stephen Trent: Could you refresh my memory as to.

Stephen Trent: Any potential adjustments you might be seeing on the Canadian side. Thank you.

Mike: Good morning, it's Mike.

Michael Stewart Rousseau: The first question concerns regulation. You know, what we've seen here in the US is the DOT looking like it wants to impose strictures for flights that are delayed, lost bags, cancelled flights, and what have you. Could you refresh my memory as to any potential adjustments you might be seeing on the Canadian side? Thank you.

Mike: So Canada has already a lot of those rules in place and we've been living and working within that that regulatory environment.

Stephen Trent: Good morning, it's Mike. So Canada already has a lot of those rules in place, and we've been living and working within that regulatory environment. The only one that obviously is in front of us is some enhancements to the APPR rules that our CTA, our regulatory body, is currently considering. Those are not publicly available yet. They should be in place later this year and, we do believe that they will, to some degree, increase the cost of compensation for customers for delays.

Mike: The only one that honestly is in front of us some enhancements to the <unk> rules that our Cta a regulatory body is currently considering.

Mike: We.

Mike: Those are not publicly available yet.

Mike: It should be later this year and.

Stephen Trent: And we do believe that they will.

Stephen Trent: To some degree increase the cost.

Stephen Trent: <unk>.

Stephen Trent: Compensation for customers for delays.

Stephen Trent: And again, we'll be smarter when we have visibility. Now, obviously, we're part of many different stakeholders that are speaking to the CTA and others about these rules. But again, that regime already exists within the Canadian regulatory environment.

Stephen Trent: And again, we will.

Stephen Trent: We'll be smarter and when we see the visibility now obviously, we're proud of our many different stakeholders that are that are speaking to the Cta and others about these rules, but again that regime already exists with the Canadian regulatory environment.

Mark Galardo: I appreciate that, Mike. Just one quick follow-up here. Some of your U.S. competitors have been mentioning overcapacity going into Mexico's beach destinations, for instance. I know it's not a big piece of the pie for you guys, but I do believe you might be launching service to the new Tulum airport. I was wondering what you guys are seeing in terms of metal going into that market. Thank you.

Speaker Change: I appreciate that Mike.

Speaker Change: Yes.

Speaker Change: One quick follow up here.

Speaker Change: Some of your U S competitors have been.

Speaker Change: Mentioning some overcapacity going into Mexico Beach destinations for instance, I know, it's not a big piece of the pie for you guys, but I do believe you might be.

Speaker Change: Launching service to the new to loom airports so.

Speaker Change: I was wondering.

Speaker Change: What you guys are seeing.

Speaker Change: In terms of metal going into that market. Thank you.

Stephen Trent: Hi Stephen, so when we look at the Canadian context and we look at our Canadian peers, I think they're coming to the realization we came to a long time ago that seasonality is a big factor; where to put aircraft in the winter in Canada has always been a challenging feat. So, you know, there's no doubt that they're putting material capacity into some markets, including Mexico. But, you know, we like where we stand.

Speaker Change: Hi, David So.

Speaker Change: When we look at the Canadian context that we look at our Canadian peers.

David: They are coming to the realization we came a long time ago that seasonality is a big factor and where to put aircraft in the winter.

Speaker Change: Canada has always been a challenging feat.

Speaker Change: There's no doubt that they are putting material capacity to send markets, including Mexico.

Speaker Change: Mexico, but we like where we stand and in particular this winter, we actually did quite well in Mexico.

Stephen Trent: And in particular, this winter, we actually did quite well in Mexico, so I'm not overly concerned. But going forward, we do expect the sun market to be competitive because that's one of the few areas that you can offset your traditional summer seasonality.

Speaker Change: So I'm not overly concerned but going forward, we do expect a sudden market to be competitive.

Speaker Change: Because that's one of the few areas that you can offset your traditional summer seasonality with.

Operator: I appreciate that. Thank you for your time.

Speaker Change: I appreciate that thank you for the time.

Konark Gupta: Our next question comes from Konark Gupta from Scotiabank. Please go ahead. Your line is open.

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

Konark Gupta: Thanks, Operator. Good morning.

Gupta: Thanks, operator, good morning.

Gupta: I just wanted to kind of follow up.

Gupta: On margin John again, so it seems like.

Gupta: CASM inflation is likely to ramp up in Q2 and Q3.

Gupta: As you kind of reach your full year outlook on that yields are normalized thing right now Kelly.

John Di Bert: I just wanted to kind of follow up on margin, John, if you can. So it seems like the adjusted chasm inflation is likely to ramp up in Q2 and Q3, as you kind of reach your full year outlook on that. Yields are normalizing right now, clearly, but you have hedged Q2 fuel, about half of that, at a very attractive price. Any comment on margin performance year over year as you get into sort of Q2 and Q3? I mean, you probably have some tough bombs there.

Gupta: But you have hedged Q2 feel about half of that at a very attractive price and any comment on margin performance year over year.

Gupta: As we get into sort of Q2 and Q3 I know you have some tough comps probably there.

John Di Bert: Yeah, I mean, I think the story is more in the comp than it is in the Q2, Q3 at 24 numbers. But last year, we had some very strong margin production, particularly if you look at Q3, I think on a full year basis, and you can do the math, but we have some compression, right. And I think that we have highlighted where that compression is coming from.

Gupta: Yeah, I mean I think.

Gupta: The story is more on the comp than it is in the Q2 Q3 of 24 numbers, but.

Gupta: Last year we.

Gupta: We had some very strong.

Gupta: On margin production, particularly.

Gupta: If you look at Q3, I think on a full year basis.

Gupta: And you can do the math, but we have some compression right and I think that we highlighted where that compression was coming from and when we gave our guidance. There's a there's some.

John Di Bert: And when we gave our guide, and there's a, you know, there's some structural costs that we're, we're going to be absorbing this year. And I think that, you know, over a longer period of time, the real end game is going to be taking advantage of the growth that the airline has, the efficiency of the new aircraft, the technology that we're deploying, and just bringing the system back to its most efficient, productive state.

Gupta: There is some structural cost.

Gupta:

Gupta: We're going to be.

Gupta: Absorbing this year and I think that over a longer period of time. The real end game is going to be taking advantage of the growth of the airline has.

Gupta: The efficiency of the new aircraft the technology that we're deploying and just bringing the system back up to its most efficient productive state. So I am actually positive on margin expansion over the next couple of years, but yes, I mean 2024 is going to be kind of a call. It a base year on which to rebuild I think what.

John Di Bert: So I'm actually positive on margin expansion over the next couple of years. But yes, I mean, 2024 is going to be a kind of a base year on which to rebuild. I think we feel good about it that we've come through a lot here over the last four years. And we've brought the airline, you know, still here, solid margins for 24, even as we kind of fully absorb the impacts of the inflation environment that we've gone through. And, so I generally feel pretty good about it. But, yes, there's a little bit of work to do from here.

Gupta: We feel good about it that we've come through a lot here over the last four years.

Gupta: We brought.

Gupta: The airline is still your.

Gupta: Solid margins for 2004, even as we kind of fully absorb the impacts of the inflation environment that we have gone through and and so I generally feel pretty good about it but yes, theres a little bit of work to do from here.

Konark Gupta: That's great, John. I appreciate it.

Speaker Change: That sounds great Hello, John appreciate it and then just kind of follow up on the shareholder returns you mentioned in your prepared remarks.

Speaker Change: But the capacity kind of restoring back to the pre pandemic level and solid balls. Now you guys are looking into some form of shareholder returns.

Speaker Change: I'd like to fall it may be there.

Speaker Change: Kind of shareholder return would you be leaning toward and what can we expect.

Speaker Change: <unk> from from tightening there.

John Di Bert: And then if we can follow up on the shareholder returns, you mentioned in your prepared remarks. You know, with the capacity kind of restoring back to pre-pandemic levels almost now, you guys are looking into some form of shareholder returns. So, with twofold, it may be there, what kind of shareholder return would you be leaning toward? And what can we expect from timing there?

Speaker Change: Yes.

Speaker Change: Won't be specific today, but I can tell you. This that traditionally you have seen that.

Speaker Change: We have been able to return cash to shareholders.

Speaker Change:

Speaker Change: Buybacks have always been.

Speaker Change: A tool that has helped.

Speaker Change: Reward.

John Di Bert: Yeah, so I won't be specific today, but I can tell you this: traditionally, you know we have been able to return cash to shareholders, and buybacks have always been a tool that has helped reward those that are that are supporting the stock in the company. I think that we're consistently looking at what the airline needs to look like as we get to the end of the decade. We have a long cycle of planning, and so we're going to balance those investments with growth.

Speaker Change: Those that are that are supporting the stock in the company.

Speaker Change: I think that.

Speaker Change: We're <unk>.

Speaker Change: Consistently looking at what the airline.

Speaker Change: Needs to look like as we get to the end of the decade.

Speaker Change: Long cycle of planning and so we're going to balance those investments that growth.

John Di Bert: Mark talked about a lot of strong drivers for why we believe the airline can continue to grow, whether immigration, six freedom, just generally speaking, economic growth, and at the same time, we believe that we can generate cash, so as we do both, then there'll be an opportunity to share that with investors. You know, as far as timing and nothing here to announce today, but let's just say that you know liquidity and the balance sheet aren't the right places for us to be able to think about.

Speaker Change: <unk> talked about a lot of strong drivers about why we believe the airline can continue to growth whether immigration sixth freedom.

Speaker Change: Just generally speaking economic growth and at the same time, we believe that we can generate cash as we do both then there'll be an opportunity to share that with investors.

Speaker Change: As far as timing and nothing to announce today, but.

Speaker Change: Let's just say that liquidity and balance sheet is in the right place for us to be able to think about these things.

Konark Gupta: Thanks, Doctor, for me.

Speaker Change: Okay. Thanks, that's it for me.

Operator: If you have any additional questions, please press star followed by the number one on your telephone keypad. Our next question comes from Cameron Doerksen from National Bank Financial. Please go ahead. Your line is open.

Speaker Change: If you have any additional questions. Please press star followed by the number one on your telephone keypad.

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

Cameron Doerksen: Yeah, thanks. Good morning.

Cameron Doerksen: Yes. Thanks. Good morning, just wanted to ask about the fleet I mean, you've mentioned here, though youre sourcing some additional 730 sevens on lease I'm, just wondering I guess the the.

Cameron Doerksen: I just wanted to ask about the fleet. You've mentioned here that you're sourcing some additional 737s on lease. I'd just like to know, I guess, the rationale for the decision here to add more narrow-body capacity. Is that a reflection of what you see as growing demand or new route opportunities, or is there, I guess, some concern over the availability of maintenance slots or engine problems that some other aircraft operators are experiencing? I was wondering what the rationale was here for looking ahead and sourcing those aircraft now.

Cameron Doerksen: Rationale for the decision here to add more narrow body capacity is that is that a reflection of what you see is <unk>.

Cameron Doerksen: Growing demand or a new route opportunities or is there some concern over your availability of maintenance slots or or engine problems that some other aircraft operators are experiencing just wondering what the rationale was here for looking ahead and sourcing those aircraft now.

Michael Stewart Rousseau: Hi Cameron, it's Mike. I'll take the question, and maybe Mark or John will add something, because it's really important. So we do see an opportunity to add more capacity at profitable margins, first of all. And there is a strong business case to take these planes into our fleet. And do some reconfiguration and then run them in 25, but also to your question, the comments: it's also defensive to some degree because we do have some challenges with the Airbus 220 engines, where some of those planes are sitting on the ground without engines right now.

Cameron Doerksen: Hi, Cameron, it's Mike I'll take the question, then maybe mark or John I'll add because it's really important.

Mike: So we do see opportunity to add more capacity profitable margins first of all so there is.

Mike: A strong business case to take these of these planes into our fleet.

Mike: And do some reconfiguration and then run them in 'twenty five but also to your tier.

Cameron Doerksen: To your question the.

Cameron Doerksen: Our comments, it's also defensive to some degree because we do have some challenges with the Airbus <unk> hundred 20 engines.

Cameron Doerksen: Some of those planes are sitting on the ground with our interest right now thats going to take some time to.

Michael Stewart Rousseau: That's going to take some time to... come back. We're working closely with Pratt on that, and there are solutions, but it will take time. And so, so, you know, we, so it's also from a defensive perspective as well. So it's a good and correct business decision from our part. The opportunity came up, and we stepped into it fairly quickly. We're still negotiating certain things around that, but we should be able to, hopefully, announce a final deal in the next short time as to how many planes and some more details behind it.

Cameron Doerksen: To come back.

Cameron Doerksen: Working closely with <unk> on that.

Cameron Doerksen: There are solutions, but it will take time and so.

Cameron Doerksen: Yes.

Cameron Doerksen: So it's also from a defensive perspective as well so.

Cameron Doerksen: Good.

Cameron Doerksen: Correct business issued from our part the opportunity came up and we stepped into it fairly quickly.

Cameron Doerksen: Still negotiating certain things around that but we should be able to hopefully announce final deal in the next short time as to how many planes and.

Cameron Doerksen: Some more details behind it.

Mark Galardo: Hey Cameron, this is Mark Galardo here. Not only is there a short-term impact of the ability to kind of mitigate those issues and also increase capacity, but medium to long-term, we have an aging fleet of Airbus 320, 319, and 321 CEO planes, and taking these planes also allows us the opportunity maybe to age down the fleet a little bit. So, you know, kind of a win in all dimensions.

Smart Colorado: Cameron This is smart Colorado here, just not only is there a short term impact of the ability to kind of mitigate those issues and also increase capacity, but medium to long term, we have an aging fleet of Airbus 300, <unk> hundred 19, <unk> hundred 21 CEO.

Smart Colorado: And taking these planes also allows us the opportunity maybe to age down the fleet a little bit.

Smart Colorado: Kind of a win on all dimensions.

Cameron Doerksen: Okay, it makes sense on the A220, I guess, engine issue. You've mentioned some, you know, aircraft on the ground. Is the I guess the cost that you're reflected, you know, in the numbers now? Is it significant? And is there any opportunity for compensation? You know, I know some other airlines are seeing that.

Speaker Change: Okay. It makes sense on the <unk> hundred 20, I guess engine issue you mentioned some new aircraft on the ground.

Speaker Change: Is the I guess the cost is that youll reflected.

Speaker Change: In the numbers now is it significant and is there any opportunity for compensation.

Speaker Change: I know some other airlines are seeing that.

Michael Stewart Rousseau: Yes, and so we're no different than other airlines. At this point in time, probably six or seven planes sitting on the ground. Seven planes sitting on the ground. That may change over time, however; we will be discussing compensation with Pratt, and we are in those discussions, but certainly, to your point, we are incurring costs right now, and those costs are in our numbers at this point in time, and hopefully, we can get some recovery of that in the Unknown Speaker. Yeah, and Cameron, you know. I mean,

Speaker Change: Yes.

Speaker Change: So we're no different than other airlines.

Speaker Change: Yes.

Speaker Change: At this point in time, probably six or seven planes sitting on the ground.

Speaker Change: Southern plains sitting on the ground.

Speaker Change: That'd be changed over time.

Speaker Change: However, we.

Speaker Change: We will.

Speaker Change: I'll be discussing compensation with Pratt.

Speaker Change: And we are always discussions, but certainly to your point, we are incurring the cost right now.

Speaker Change: Those costs are in our numbers at this point in time.

Speaker Change: And hopefully we can get some recovery of that in the.

Speaker Change: In not so distant future.

John Di Bert: Yeah, and Cameron, you know, I mean, we were also making some choices in terms of, you know, running a little bit more regional aircraft and things like this. So it shows up in kind of direct cost, you know, and also the aircraft not available, but it also shows up in how we deploy some smaller, less, less cost efficient aircraft on routes that otherwise NATO 20, which was very efficient, was running. So all those things kind of are in there.

Speaker Change: And Cameron.

Speaker Change: We are also making some choices in terms of running a little bit more regional aircraft and things like this so it shows up in kind of direct costs.

Speaker Change: Also the aircraft not available, but it also in how we deploy.

Speaker Change: Some smaller less less cost efficient aircrafts on routes that otherwise in April 'twenty, which was very efficient was running so all those things kind of are in there.

John Di Bert: And, you know, we meet with Pratt regularly, and we're confident they're going to, you know, work through all this. But at the same time, we don't think this is going to solve itself in the next quarter or two. So, you know, there's a little bit of time ahead. And, you know, Mike just spoke about the max decision that plays into all of this. And so I think, you know, we're always trying to balance the risk and reward here. And I think, you know, these are the right decisions and a little bit of pain here in the short term, but longer term, we're still very happy with the 8 to 25.

Speaker Change: We meet with Pratt to regularly and we're confident that theyre going to work through all of this but at the same time we.

Cameron Doerksen: Okay, no, that's very helpful. Thanks very much.

Speaker Change: We don't think this is going to solve itself in the next quarter or two so there's a little bit of time ahead.

Speaker Change: Mike just spoke about the Max decision that plays into all of this and so I think we're always we're always going to balance the risk reward here and I think these are the right decisions in a little bit of pain here in the short term but.

Speaker Change: Longer term, we're still very happy with the 23.

Speaker Change: Okay No that's very helpful. Thanks very much.

Operator: We have no further questions. I would like to turn the call back over to Valerie Durand for closing remarks.

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

Valérie Durand: And thank you, Julianne. Thank you once again for joining us this morning. Once more, if you have any follow-up questions, feel free to contact us at Investor Relations. Encore une fois, merci beaucoup de nous avoir accompagnés cette matin sur notre appel de première quarter 2024. Pour toutes questions supplémentaires, nhésitez pas à nous contacter aux relations investiables. Merci, bonne journée. Have a nice day.

Speaker Change: Thank you Suzanne Thank you once again for joining us. This morning once more if you have any follow up questions feel free to contact us at Investor Relations.

Speaker Change: Several questions.

Speaker Change: So my thanks to all of this happened in Tommy.

Speaker Change: Thank you.

Speaker Change: The kit sales demand down decline in Kentucky.

Speaker Change: Sounds like a SaaS massive benjani have a nice day.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

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

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].