Q2 2024 Air Canada Earnings Call

Hello and welcome to the Air Canada second quarter 2024 results conference call. All lines are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question, please press star followed by the number one on your telephone keypad.

Unknown Executive: 24 Results Conference Call. All lines are in a listen-only mode.

Operator: Results Conference Call. All lines are in a listen-only mode.

Unknown Executive: After the speaker's remarks, there will be a question-and-answer session. To ask a question, please press star, followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded.

Valérie Durand: I would now like to turn the conference over to Valerie Doer, Head of Investor Relations Incorporate Sustainability at Air Canada. You may begin.

Operator: After the speaker's remarks, there will be a question-and-answer session. To ask a question, please press star followed by the number 1 on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Valerie Durand, Head of Investor Relations and Corporate Sustainability at Air Canada. You may begin.

As a reminder, this conference call is being recorded.

Valérie Durand: I would now like to turn the conference over to Valerie Durand, Head of Investor Relations and Corporate Sustainability at Air Canada. You may begin.

Unknown Executive: Thank you, Sarah. Hello.

Sarah: Sarah. Hello, bonjour, et bienvenue à notre deuxième revue trimestrielle de 2024. Welcome and thank you for attending our second quarter 2024 earnings call. Joining us this morning are Mike Rousseau, our President and CEO, Mark Galardo, our Executive Vice President of Revenue and Network Planning and President of Cargo, and John D. Burt, our Executive Vice President and CFO. Other executive team members are with us as

Valérie Durand: Thank you, Sarah. Hello, bonjour et bienvenue à notre deuxième revue trimestrielle de 2024. Welcome and thank you for attending our second quarter 2024 earnings call.

Valérie Durand: Welcome, and thank you for attending our second quarter 2024 earnings call. Joining us this morning are Mike Russell, our President and CEO. Mark Galardo, our Executive Vice President of Revenue and Network Planning and President of Cargo, and John D. Bert, our Executive Vice President and CFO. Other executive team members are with us as well.

Speaker Change: Joining us this morning are Mike Rousseau, our President and CEO , Mark Galardo, our Executive Vice Presidents of Revenue and Network Planning and President of Cargo, and John D. Burt, our Executive Vice Presidents and CFO .

Valérie Durand: Mike will begin this call with an overview of the quarter. Mark will start the conference. We will speak on revenue, network updates, and trends, and John will provide comments about our financial performance before turning it back to Mike. We will then take questions from equity analysts.

Mike Rousseau: Mike will begin this call with an overview of the quarter. Mark will speak about revenue, network updates, and trends, and John will provide comments about our financial performance before turning it back to Mike. We will then 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 risks and uncertainty. Our actual results could differ materially from any stated expectations. Please refer to our forward-looking statement in Air Canada's second quarter news release, available on aircanada.com and on CDAR Plus. With that, I'd like to turn the call over to Mike.

Speaker Change: Other executive team members are with us as well. Mike will begin this call with an overview of the quarter. Mark will speak on revenue, network updates and trends, and John will provide comments about our financial performance before turning it back to Mike. We will then take questions from equity analysts.

Unknown Executive: 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 risks and uncertainties. Our actual results could differ materially from any stated expectation.

Speaker Change: 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 risks and uncertainties.

Speaker Change: Our actual results could differ materially from any stated expectations. Please refer to our forward-looking statement in Air Canada's second quarter's news release available on aircanada.com and on CDAR+. With that, I'd like to turn the call over to Mike.

Unknown Executive: Please refer to our forward-looking statement in Air Canada's second quarter's news release available on aircannons.com and on Cedar Plus.

Michael Rousseau: With that, I'd like to turn the call over to Mike. Thank you, Valerie, and good morning, Oujo, and thanks for joining us. Our second quarter results were solid, although they did not achieve our internal expectations. We achieved second quarter operating revenues of $5.5 billion, but Justin Ibadav was $914 million in the quarter, with an adjusted Ibadav margin of 16.6%. We generated $1.5 billion in free cash flow on a year-to-date basis. We demonstrated progress in several areas. On-time performance improved 10 points on 4% more operated flights and 3% more passengers carried versus the same quarter last year.

Mike Rousseau: Thank you, Valerie, and good morning, bonjour, and thanks for joining us. Our second quarter results were solid, although they did not achieve our internal expectations. We achieved second quarter operating revenues of $5.5 billion. Adjusted EBITDA was $914 million in the quarter, with an adjusted EBITDA margin of 16.6%, and we generated 1.5 billion in free cash flow on a year-to-day basis.

Mike: Thank you, Valerie, and good morning, bonjour, and thanks for joining us.

Mike: Our second quarter results were solid, although they did not achieve our internal expectations.

Mike: We achieved second quarter operating revenues of $5.5 billion.

Mike: Adjusted EBITDA was $914 million in the quarter, with an adjusted EBITDA margin of 16.6%.

Mike: And we generated $1.5 billion in free cash flow on a year-to-day basis.

Mike Rousseau: We demonstrated progress in several areas. On time performance improved 10 points on 4% more operated flights and 3% more passengers carried versus the same quarter last year. I was also very pleased that Air Canada won more awards than any other Canadian carrier at the 24 Skytrax World Airline Awards, and that Star Alliance was named the Best Airline Alliance. Skytrax rated Air Canada among the top 30 airlines in the world and the best in Canada by a wide margin.

Mike: We demonstrated progress in several areas. On-time performance improved 10 points on 4% more operated flights and 3% more passengers carried versus the same quarter last year.

Michael Rousseau: It was also very pleased that Air Canada won more awards than any other Canadian carrier at the 24 Skytrax World Airline Awards, and that Star Alliance was named the best airline alliance. Sky Tracks rated Air Canada among the top 30 airlines in the world, and the best in Canada by a wide margin. Credit for this recognition and our results goes to our 39,000 employees. I thank them for their hard work and dedication in taking care of our customers and transporting them safely.

Speaker Change: I was also very pleased that Air Canada won more awards than any other Canadian carrier at the 24 Skytrax World Airline Awards and that Star Alliance was named the Best Airline Alliance.

Speaker Change: Skytrax rated Air Canada among the top 30 airlines in the world and the best in Canada by a wide margin.

Mike Rousseau: Credit for this recognition and our results goes to our 39,000 employees. I thank them for their hard work and dedication in taking care of our customers and transporting them safely. As 2024 progresses, we can see that 2023 was truly a unique year. The rapid post-pandemic surge in demand combined with limited capacity resulted in very strong yields and load factors last year.

Speaker Change: Credit for this recognition and our results goes to our 39,000 employees.

Speaker Change: I thank them for their hard work and dedication in taking care of our customers and transporting them safely.

Michael Rousseau: As 2024 progresses, we can see that 2023 was truly a unique year. The rapid post-pandemic surge in demand combined with constraint capacity resulted in very strong yields and load factor last year. We recently revised our full-year guidance to reflect the impact of the changes in market conditions. Mark and John will discuss this in more detail.

Speaker Change: As 2024 progresses, we can see that 2023 was truly a unique year. The rapid post-pandemic surge in demand, combined with constraint capacity, resulted in very strong yields and load factors last year.

Mike Rousseau: We recently revised our full-year guidance to reflect the impact of the changes in market conditions. Mark and John will discuss this in more detail, but before I turn this over to Mark, I'd like to take this opportunity to thank our customers. We are grateful for your trust and loyalty. You are the reason for which we fly, and we look forward to serving you with excellence.

Speaker Change: We recently revised our full year guidance to reflect the impact of the changes in market conditions.

Michael Rousseau: But before I turn this over to Mark, I'd like to take this opportunity to thank our customers. We are grateful for your trust and loyalty. You are the reason for which we fly, and we look forward to serving you with actions.

Speaker Change: Mark and John will discuss this in more detail.

Speaker Change: But before I turn this over to Mark, I'd like to take this opportunity to thank our customers.

Speaker Change: We are grateful for your trust and loyalty. You are the reason for which we fly, and we look forward to serving you with excellence. Over to you, Mark.

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

Mark Galardo: Thanks, Mike, and good morning, everyone. Bonjour.

Mark Galardo: Bonjour, j'aime et d'abord, est-ce qu'il y a un employé pour être le trimestre salé? Thanks to all the employees for helping us deliver good Q2 results. Our operating revenues increase 2% year over year to more than 5.5 billion, almost 7% more capacity. Passenger revenues were almost 5 billion, about 2%, translating into a 4.4% decline in PRASM from Q2 2023. The system loads factor declined by about 2% points in the same period last year, landing at 85.7%, which remains higher than historical averages. Demand continues to be resilient.

Mark Galardo: First, I would like to congratulate our employees on our solid quarter. Thanks to all our employees for helping us deliver good Q2 results. Our operating revenues increased 2% year-over-year to more than $5.5 billion, almost 7% more capacity. Passenger revenues were almost $5 billion, up about 2%, translating into a 4.4% decline in PRASM from Q2 2023. The system load factor declined by about 2 percentage points from the same period last year, landing at 85.7%, which remains higher than historical averages.

Mark: Thanks Mike and good morning everyone. Bonjour. J'aimerais d'abord féliciter nos employés pour notre trimestre solide.

Speaker Change: Thanks to all our employees for helping us deliver good Q2 results.

Mark: Our operating revenues increased 2% year-over-year to more than $5.5 billion, almost 7% more capacity.

Speaker Change: Passenger revenues were almost $5 billion, up about 2%, translating into a 4.4% decline in PRAZM from Q2 2023.

Speaker Change: The system load factor declined by about 2 percentage points from the same period last year, landing at 85.7%, which remains higher than historical averages.

Mark Galardo: Demand continues to be resilient. We had several strategic achievements during the second quarter. International markets continue to be the driving force behind our overall earnings. The new routes that we added are accretive in most cases above the average profitability of our current route network, and Six Freedom revenues grew year over year, notwithstanding the challenges we face with our A220 fleet and the regional network, which constrain its potential. However, we did observe some weakness in international markets compared to Q2 2023, which was above the historical level.

Mark Galardo: We had several strategic achievements over the second quarter. International markets continue to be the driving force behind our overall earnings. The new routes that we added are accretes in most cases above the average profitability of our current route network. And six Freedom revenues grew year by year, notwithstanding the challenges we face with our A220 fleet and the regional network, which constrained its potential. However, we did observe some weakness in international markets compared to Q2 2023, which was above historical levels. Atlantic performance was particularly impacted by a weak point of sale in Europe and the competitive pressures on the Canadian point of sale.

Speaker Change: Demand continues to be resilient.

Speaker Change: We had several strategic achievements over the second quarter.

Speaker Change: International markets continue to be the driving force behind our overall earnings.

Speaker Change: The new routes that we added are accretive and, in most cases, above the average profitability of our current route network.

Speaker Change: And Six Freedom Revenues grew year over year, notwithstanding the challenges we faced with our A220 fleet and the regional network, which constrained its potential.

Speaker Change: However, we did observe some weakness in international markets compared to Q2 2023, which was above historical levels.

Mark Galardo: Atlantic performance was particularly impacted by a weak point of sale in Europe and the competitive pressures on the Canadian point. We are keeping a measured approach to capacity. We continue to see strong demand for leisure travel to Europe, in particular the Mediterranean markets, and we're pleased with the results we achieved again this year. Overall, we believe that the result of our Q2 performance in Europe is less about consumer weakness and more about competitive supply growth above what the market can sustain in the short term. We respond to this by reducing our full-year Atlantic capacity by eight points from our initial plan, landing at around 3% growth above 2023, and shifting these assets to the Pacific instead.

Speaker Change: Atlantic Performance was particularly impacted by a weak point of sale in Europe and the competitive pressures on the Canadian point of sale.

Mark Galardo: We are keeping a measured approach to capacity. We continue to see strong demand for leisure travel to Europe, in particular the Mediterranean markets, and we're pleased with the results we achieved again this year. Overall, we believe that the Q2, the result of our Q2 performance in Europe is less about consumer weakness and more about competitive supply growth above, with the market consistent in the short term. We respond to this by reducing our full year Atlantic capacity by eight points from our initial plan, landing at around 3% growth above 2023 and shifting these assets to the Pacific instead.

Speaker Change: We are keeping a measured approach to capacity.

Speaker Change: We continue to see strong demand for leisure travel to Europe , in particular the Mediterranean markets, and we're pleased with the results we achieved again this year.

Speaker Change: Overall, we believe that the Q2, the result of our Q2 performance in Europe is less about consumer weakness.

Speaker Change: and more about competitive supply growth above what the market can sustain in the short term.

Speaker Change: We responded to this by reducing our full year Atlantic capacity by 8 points from our initial plan, landing at around 3% growth above 2023, and shifting these assets to the Pacific instead.

Mark Galardo: Other airlines, meanwhile, increase transatlantic sea capacity by almost 20% for the full year. The Pacific market continues to perform well. The Rasmid decline can be explained by the difficult comparable environment of 2023. Market capacity to Asia was also significantly below market demand in Q2 2023. The strength of our network and our agility gives us opportunities to respond to a range of factors and pivot capacity to where it makes more sense. Diverting capacity away from Europe and into Asia was the right call for us. New routes to Seoul from Montreal and to Osaka from Toronto all performed exceedingly well, and this would only have the Montseil for three months prior to the respective launches.

Mark Galardo: Other airlines meanwhile increased transatlantic sea capacity by almost 20 percent. The Pacific market continues to perform well. The RASM decline can be explained by the difficult, comparable environment of 2023; market capacity to Asia was also significantly below market demand in Q2 2023.

Speaker Change: Other airlines, meanwhile, increased transatlantic sea capacity by almost 20% for the full year.

Speaker Change: The Pacific market continues to perform well. The RASM decline can be explained by the difficult, comparable environment of 2023.

Speaker Change: Market capacity to Asia was also significantly below market demand in Q2 2023.

Mark Galardo: The strength of our network and our agility gives us opportunities to respond to a range of factors and pivot capacity to where it makes most sense. Diverting capacity away from Europe and into Asia was the right call for us. New routes to Seoul from Montreal and to Osaka from Toronto all performed exceedingly well, and this with only having them on sale for three months prior to their respective launches. North American markets did well as we saw control and deployed capacity as well as further improvements in the corporate recovery, especially in the Canada-US sector.

Speaker Change: The strength of our network and our agility gives us opportunities to respond to a range of factors and pivot capacity to where it makes most sense.

Speaker Change: Diverting capacity away from Europe and into Asia was the right call for us.

Speaker Change: New routes to Seoul from Montreal and to Osaka from Toronto all performed exceedingly well, and this with only having them on sale for three months prior to their respective launches.

Mark Galardo: North American markets did well as we saw control and deployed capacity, as well as further improvements in the corporate recovery, especially on the Canada U.S. sector. It's important to note, and as we mentioned on previous calls, our investment in the U.S. is longer term in nature. Our new routes launches here have performed in line with expectations. Our premium offering remains robust, with growth in premium cabin revenues outpacing the overall rent. New Groves, Air Cannibications, also delivered consistently.

Speaker Change: North American markets did well as we saw control and deployed capacity as well as further improvements in the corporate recovery, especially on the Canada-U.S. sector.

Mark Galardo: It's important to note, and as we've mentioned on previous calls, our investment in the US is longer term. Our new Rousseau launches here have performed in line with expectations. Our premium offering remains robust, with growth in premium cabin revenues outpacing growth in overall revenue. Air Canada vacations also delivered.

Speaker Change: It's important to note, and as we've mentioned on previous calls, our investment in the U.S. is longer term in nature.

Speaker Change: Our new Rousseau launches here have performed in line with expectations.

Speaker Change: Our premium offering remains robust, with growth in premium cabin revenues outpacing the overall revenue growth.

Mark Galardo: Turning to cargo, revenues increased 1% year over year for two reasons. One, higher volume on chargeable kilos through the network, and higher freighter revenues in America. The yield dynamic in most markets and lower freighter operations in the Atlantic market particularly offset this increase. Continually in strictly addressing the market conditions, we removed 2.767 of the furthest from service in April. Taking a prudent approach, we have planned capacity to be up between 5.5% and 6.5% of the full year. This reflects sustained supply chain pressures in current market conditions and allows us to pursue more favorable yields. And as we look forward in international markets, when compared to the same quarter last year, we expect the yield softness to continue in Q3 2024, declining around mid-single digits.

Speaker Change: Vacations also delivered consistently.

Mark Galardo: Turning to cargo, revenues increased 1% year over year for two reasons. One, higher volume of chargeable kilos through the network and higher freighter revenues in America. However, the yield dynamic in most markets and lower freighter operations in the Atlantic market particularly offset this increase. Continually and swiftly addressing the market conditions, we removed two 767 freighters from service.

Speaker Change: Turning to cargo, revenues increased 1% year-over-year for two reasons.

Speaker Change: One higher volume on chargeable kilos through the network and higher freighter revenues in the Americas.

Speaker Change: The yield dynamic in most markets and lower freighter operations in the Atlantic market particularly offset this.

Speaker Change: Increased.

Speaker Change: Continually and swiftly addressing the market conditions, we remove two 767 freighters from service in April .

John D. Burt: Taking a prudent approach, we have planned capacity to be up between 5.5 and 6.5%. This reflects sustained supply chain pressures and current market conditions and allows us to pursue more favorable yields. And as we look forward in international markets, when compared to the same quarter last year, we expect the yield softness to continue in Q3 2024, declining around mid single-digit. We are seeing industry capacity stabilize over the Atlantic in Q4.

Speaker Change: Taking a prudent approach, we have planned capacity to be up between 5.5 and 6.5% for the full year.

Speaker Change: This reflects sustained supply chain pressures and current market conditions and allows us to pursue more favorable yields.

Speaker Change: And as we look forward in international markets, when compared to the same quarter last year, we expect the yield softness to continue in Q3 2024, declining around mid-single digits.

Mark Galardo: We are seeing industry capacity stabilize already Atlantic in Q4. For the Pacific, we have set our capacity plans to respond to anticipated demand, and we expect to approach 2023 yields with double-digit growth from 2019 levels. If we go system wide again for the third quarter of 2024, we anticipate the yield and PRASM declines will continue. It's worth putting this in perspective as compared to prior Q3 periods, including the unique environment of Q3, 2023. Our Q3, 2024 prasm will land above 2019 prasm, and we expect it will be above Q3, 2022 levels as well. And if we look forward into Q4, we see year over year prasm stabilizing.

Speaker Change: We are seeing industry capacity stabilize over the Atlantic in Q4.

John D. Burt: For the Pacific, we have set our capacity plans to respond to anticipated demand, and we expect to approach 2023 yield with double-digit growth from 2019. However, if we go system-wide again for the third quarter of 2024, we anticipate the yield and prism declines will continue. It's worth putting this in perspective as compared to prior Q3 periods, including the unique environment of Q3 2020. Our Q3 2024 Prism will land above 2019 Prism, and we expect it will be above Q3 2022 levels as well.

Speaker Change: For the Pacific, we have set our capacity plans to respond to anticipated demand and we expect to approach 2023 yields with double-digit growth from 2019 levels.

Speaker Change: If we go system-wide, again for the third quarter of 2024, we anticipate the yield and prosimum declines will continue.

Speaker Change: It's worth putting this in perspective as compared to prior Q3 periods, including the unique environment of Q3 2023.

Speaker Change: Our Q3 2024 PRAZM will land above 2019 PRAZM, and we expect it will be above Q3 2022 as well. And if we look forward into Q4, we see year-over-year PRAZM stabilizing.

John D. Burt: And if we look forward into Q4, we see year-over-year present stabilizing. We are growing scale at our hubs, leveraging our expanding and globally competitive international network, and growing our six freedom potential. We see that our strategic pillars are driving financial results. These pillars will become even more important as we fully leverage their potential with a new incoming fleet. Thank you. Merci. And John, over to you.

Mark Galardo: We are growing scale at our hubs, leveraging our expanding and globally competitive international network and growing our six-reed and potential. We see that our strategic pillars are driving financial results. These pillars will become even more important as we fully leverage our potential with a new incoming fleet.

Speaker Change: We are growing scale at our hubs, leveraging our expanding and globally competitive international network, and growing our six freedom potential.

Speaker Change: We see that our strategic pillars are driving financial results.

Speaker Change: These pillars will become even more important as we fully leverage their potential with a new incoming fleet.

John Bert: Thank you, Nafi and John. Over to you. Thanks, Mark, and good morning, everyone. Bonjour, the focus and hard work of our employees. And I thank them for their support in helping us deliver our Q2 results. We recorded an operating income of $466 million and adjusted EBITDA of $914 million. Adjusted net income was $369 million or $0.98 per dollar to share. For the second quarter, operating expenses increased 9% year over year, driven primarily by an almost 7% growth in capacity. Fuel expense increased 12% due to higher jet fuel consumption, related to increased flowing, and a 3% higher jet fuel cost, which included a $25 million hedging loss and the impact of the weakening Canadian wealth.

John D. Burt: Thanks, Mark, and good morning, everyone. Bonjour à tous.

Speaker Change: Thank you, merci, and John, over to you.

John D. Burt: I echo Mike and Mark's comments about the focus and hard work of our employees, and I thank them for their support in helping us deliver our Q2 results. We recorded an operating income of $466 million and an adjusted EBITDA of $914 million. Adjusted net income was $369 million, or $0.98 per diluted share.

John: Thanks, Mark, and good morning everyone, bonjour à tous. I echo Mike and Mark's comments about the focus and hard work of our employees and I thank them for their support in helping us deliver our Q2 results.

John: We recorded an operating income of $466 million and an adjusted EBITDA of $914 million.

John: Adjusted net income was $369 million or 98 cents per diluted share.

John D. Burt: For the second quarter, operating expenses increased 9% year over year, driven primarily by an almost 7% growth in capacity. Fuel expense increased 12% due to higher jet fuel consumption related to increased flying and a 3% higher jet fuel cost, which included a $25 million hedging loss and the impact of the weakening Canadian Gulf. Labor expense increased 10% due to accruals for wage-related initiatives and increased headcount to support the capacity growth.

John: For the second quarter, operating expenses increased 9% year-over-year, driven primarily by an almost 7% growth in capacity.

Speaker Change: Fuel expense increased 12% due to higher jet fuel consumption related to increased flying and a 3% higher jet fuel cost, which included a $25 million hedging loss and the impact of the weakening Canadian Dolphins.

John Bert: Labor expense increased 10% due to accruals for wage-related initiatives and increased headcounts to support the capacity growth. Main and 6% increased 22%, primarily resulting from a greater number of maintenance events, both scheduled and due to the increased flying activity and higher average rates year over year. We continue to work through the ongoing challenges affecting some of our A220s as well. We anticipate some supply compensation on the PWA 1500 to offset a portion of the incremental costs experienced. IT-related costs also contributed to the year-over-year operating expense increase as we invest in customer experience and productivity initiatives while we continue to enhance the security of our technology infrastructure.

Speaker Change: Labor expense increased 10% due to accruals for wage-related initiatives and increased headcount to support the capacity growth.

John D. Burt: Maintenance expense increased 22%, primarily resulting from a greater number of maintenance events, both scheduled and due to the increased flying activity and higher average rates year over year. We continue to work through the ongoing challenges affecting some of our A220s as well. We anticipate some supply compensation on the PW1500 to offset a portion of the incremental costs experienced. IT-related costs also contributed to year-over-year operating expense increases as we invest in customer experience and productivity initiatives while we continue to enhance the security of our technology infrastructure.

Speaker Change: Maintenance expense increased 22%, primarily resulting from a greater number of maintenance events, both scheduled and due to the increased flying activity and higher average rates year over year.

Speaker Change: We continue to work through the ongoing challenges affecting some of our A220s as well.

Speaker Change: We anticipate some supply compensation on the PW-1500 to offset a portion of the incremental costs experienced.

Speaker Change: IT-related costs also contributed to the year-over-year operating expense increase as we invest in customer experience and productivity initiatives while we continue to enhance the security of our technology infrastructure.

John Bert: We maintained cost-discipline and generated productivity gains. Adjusted chasm was well-contained and grew 1.7 percent year-over-year.

John D. Burt: We maintained cost discipline and generated productivity gains. Adjusted chasm was well contained and grew 1.7% year over year, turning to free cash flow. We generated $451 million in the quarter and $1.5 billion year-to-date. Given strong first half cash generation and even with net cash usage expected in the second half, we are confident that we can deliver free cash flow in line with our initial expectations. Our leverage ratio was 1.0 at the end of Q2.

Speaker Change: We maintained cost discipline and generated productivity gains.

Speaker Change: Adjusted chasm was well contained and grew 1.7% year-over-year.

John Bert: Turning to free cash flow. We generated $451 million in the quarter and $1.5 billion year-to-date. Given strong first half cash generation and even with net cash usage expected in the second half, we are confident that we can deliver free cash flow in line with our initial expectations. Our leverage ratio was 1.0 at the end of Q2. Over the last 18 months, we produced our leverage and improved our balance sheet significantly. Rating agencies have also acknowledged our progress in April. S&P raised our corporate rating to double B and the rating of various secured debt instruments by one notch.

Speaker Change: Turning to free cash flow, we generated $451 million in the quarter and $1.5 billion year-to-date.

Speaker Change: Given strong first half cash generation and even with net cash usage expected in the second half, we are confident that we can deliver free cash flow in line with our initial expectations.

Speaker Change: Our leverage ratio was 1.0 at the end of Q2.

John D. Burt: Over the last 18 months, we've reduced our leverage and improved our balance sheet significantly. Rating agencies have also acknowledged our progress. In April, S&P raised our corporate rating to double B and the rating of various secured debt instruments by one knot.

Speaker Change: Over the last 18 months, we've reduced our leverage and improved our balance sheet significantly.

Speaker Change: Rating agencies have also acknowledged our progress.

Speaker Change: In April , S&P raised our corporate rating to BB and the rating of various secured debt instruments by one notch.

John Bert: Going forward, we will continue to maintain our strong balance sheet. Our current leverage ratio provides us flexibility for capital allocation choices over time. As to our fleet, we will soon start taking delivery of our remaining A220s. We recently announced an additional lease of Boeing 737 MAX aircraft. These aircraft are expected to enter into service in the summer of 2025, and they are included in our disclosed committed expenditures. Looking ahead, we are excited about the recent DASA certification of the Airbus A321XLR, which we expect will join our fleet in 2025. We now also expect deliveries of the Boeing 787-10s to occur over a two-year period starting in 2026, providing a more balanced flow of CAPEX and aircraft entry into service.

John D. Burt: Going forward, we'll continue to maintain our strong balance sheet. Our current leverage ratio provides us with flexibility for capital allocation choices over time. As to our fleet, we will soon start taking delivery of our remaining A220s. Additionally, we recently announced eight additional leased Boeing 737 MAX aircraft. These aircraft are expected to enter service in the summer of 2025, and they are included in our disclosed committed expenditure. Looking ahead, we are excited about the recent DIASTA certification of the Airbus A321XLR, which we expect will join our fleet in 2025.

Speaker Change: Going forward, we'll continue to maintain our strong balance sheet. Our current leverage ratio provides us flexibility for capital allocation choices over time.

Speaker Change: As to our fleet, we will soon start taking delivery of our remaining A220s.

Speaker Change: We recently announced eight additional leased Boeing 737 MAX aircraft.

Speaker Change: These aircraft are expected to enter into service in the summer of 2025, and they are included in our disclosed committed expenditures.

Speaker Change: Looking ahead, we are excited about the recent DASA certification of the Airbus A321XLR, which we expect will join our fleet in 2025.

John D. Burt: We now also expect deliveries of the Boeing 787-10s to occur over a two-year period starting in 2026, providing a more balanced flow of CAPEX and aircraft entry into service. The A220s, A321XLRs, and the additional 787-10s are critical components of our fleet strategy and network optimization. I want to emphasize that we are proactively managing our fleet plans and are ensuring, through options and other rights, that we have the flexibility to work with different economic scenarios.

Speaker Change: We now also expect deliveries of the Boeing 787-10s to occur over a two-year period starting in 2026.

Speaker Change: providing a more balanced flow of capex and aircraft entry into service.

John Bert: The A220s, A321XLRs, and the 787-10s additional aircraft are critical components of our fleet strategy and network optimization. I want to emphasize that we are proactively managing our fleet plans and are ensuring, through options and other rights, that we have the flexibility to work with different economic scenarios. As indicated in July, we expect capacity to increase between five and a half and six and a half percent in 2024, and our full-year adjusted EBITDA to be in the range of $3.1 to $3.4 billion. This is largely driven by an expected full-year prasm reduction of around 4% versus 2023, as opposed to our previous flatish year-over-year expectation.

Speaker Change: The A220s, A321XLRs, and the 787-10s additional aircraft are critical components of our fleet strategy and network optimization.

Speaker Change: I want to emphasize that we are proactively managing our fleet plans and are ensuring through options and other rights that we have the flexibility to work with different economic scenarios.

John D. Burt: As indicated in July, we expect capacity to increase between five and a half and six and a half percent in 2024 and our full-year adjusted EBITDA to be in the range of $3.1 to $3.4 billion. This is largely driven by an expected full-year PrASM reduction of around 4% versus 2023, as opposed to our previous flattish year-over-year expectation. We see second quarter load factor trends continuing into Q3 2024, ending with a low single-digit decline in Q4 24 when compared to the same quarter last year. Guidance reflects our updated assumptions relating to the price of jet fuel and the weakened Canadian dollar against the U.S. dollar. We expect the 2024 Adjusted Chasm to increase between 2.5 and 3.5% year over year.

Speaker Change: As indicated in July , we expect capacity to increase between 5.5% and 6.5% in 2024 and our full year adjusted EBITDA to be in the range of $3.1 to $3.4 billion.

Speaker Change: This is largely driven by an expected full-year PrASM reduction of around 4% versus 2023, as opposed to our previous flattish year-over-year expectation.

John Bert: We see second-quarter load factor trends continuing into Q3 2024, ending with a low single-digit decline in Q4 24, when compared to the same quarter last year. Guidance reflects our updated assumptions related to the price of jet fuel and weakened Canadian dollar against the U.S. dollar. We expect 2024-adjusted chasm to increase between 2.5 and 3.5 percent year over year. As always, we will continue to adapt to market conditions, manage capacity proactively, and contain costs through productivity and other initiatives. Our focus remains on building an underlying sustainable cost structure that supports our long-term growth, competitiveness, and profitability, while also rewarding our employees for their hard work and dedication.

Speaker Change: We see second quarter load factor trends continuing into Q3 2024, ending with a low single-digit decline in Q4 2024 when compared to the same quarter last year.

Speaker Change: Guidance reflects our updated assumptions relating to the price of jet fuel and the weakened Canadian dollar against the US dollar.

Speaker Change: We expect 2024 Adjusted Chasm to increase between 2.5% and 3.5% year-over-year.

John D. Burt: As always, we will continue to adapt to market conditions, manage capacity proactively, and contain costs through productivity and other initiatives. Our focus remains on building an underlying sustainable cost structure that supports our long-term growth, competitiveness, and profitability, while also rewarding our employees for their hard work and dedication. Our adjusted 2024 CHASM guidance contemplates some headwinds shifting to the right, like APPR amendments as an example. However, we forecast maintenance expense patterns to remain in line with what we've seen year to date.

Speaker Change: As always, we will continue to adapt to market conditions, manage capacity proactively, and contain costs through productivity and other initiatives.

Speaker Change: Our focus remains on building an underlying sustainable cost structure that supports our long-term growth, competitiveness, and profitability, while also rewarding our employees for their hard work and dedication.

John Bert: Our adjusted 2024 chasm guidance contemplates some headwinds shifting to the right, like APPR amendments, as an example. We forecast maintenance expense patterns to remain in line with what we've seen year to date, and while we're still experiencing supply chain issues, as previously mentioned, we're addressing these and looking to adjust with our suppliers.

Speaker Change: Our adjusted 2024 CHASM guidance contemplates some headwinds shifting to the right, like APPR amendments as an example.

Speaker Change: We forecast maintenance expense patterns to remain in line with what we've seen year-to-date. And while we're still experiencing supply chain issues, as previously mentioned, we're addressing these and looking to adjust with our suppliers.

John D. Burt: And while we're still experiencing supply chain issues, as previously mentioned, we're addressing these and looking to adjust with our suppliers. We remain confident in our long-term strategy and continue to be focused on key priorities, including building a modern, efficient, mission-ready fleet as the foundation of our long-term network strategy, allowing us to capitalize on our unique growth opportunities. Investing in our people, premium products, and customer excellence; maintaining a strong balance sheet and a responsible risk profile; and focusing on shareholder value creation by returning to margin expansion and by generating reliable and consistent free cash flow. With that, thank you very much. Over to you, Mike.

John Bert: We remain confident in our long-term strategy and continue to be focused on key priorities, including building a modern, efficient, mission-ready fleet as the foundation of our long-term network strategy, allowing us to capitalize on our unique growth opportunities, investing in our people, premium products, and customer excellence, maintaining a strong balance sheet and a responsible risk profile. And by focusing on shareholder value creation, by returning to margin expansion, and by generating reliable and consistent free cash flow.

Speaker Change: We remain confident in our long-term strategy and continue to be focused on key priorities including

Speaker Change: Building a modern, efficient, mission-ready fleet is the foundation of our long-term network strategy, allowing us to capitalize on our unique growth opportunities.

Speaker Change: Investing in our people, premium products, and customer excellence.

Speaker Change: Maintaining a strong balance sheet and a responsible risk profile.

Speaker Change: and by focusing on shareholder value creation by returning to margin expansion and by generating reliable and consistent free cash flow.

Michael Rousseau: With that, thank you very much over you, Mike. Well, thank you, John.

Speaker Change: With that, thank you very much. Over to you, Mike.

Michael Rousseau: The airline industry is highly regulated and extremely dynamic, competitive, and complex. We serve passengers and moments that are important and often deeply meaningful to them. We don't live up to expectations. We understand the criticism and disappointment.

Mike Rousseau: The airline industry is highly regulated and extremely dynamic, competitive, and complex. We serve passengers in moments that are important and often deeply meaningful. But we don't live up to expectations.

Mike: Well, thank you, John .

Mike: The airline industry is highly regulated and extremely dynamic, competitive, and complex.

Mike: We serve passengers in moments that are important and often deeply meaningful to them.

Mike Rousseau: We understand the criticism and disappointment. At times, though, there are misleading or misinformed comments or judgments from self-proclaimed experts that mischaracterize our industry or company and are an injustice to the incredible work our employees carry out for our customers. We accept accountability to our investors and to our stakeholders. We look forward to being successful in an industry and an environment that have become more complex post-pandemic. Our success is contingent on having a strong and cost-competitive business model, an experienced, creative, and nimble leadership team, and having employees who are proudly engaged to provide the best service possible.

Mike: We don't live up to expectations, we understand the criticism and disappointment.

Michael Rousseau: At times, though, there are misleading or misinformed comments or judgments from self-proclaimed experts that mischaracterize our industry, our company, and our an injustice to the incredible work our employees carry out for our customers. We accept accountability to our investors and to our stakeholders.

Speaker Change: At times, though, there are misleading or misinformed comments or judgments from self-proclaimed experts that mischaracterize our industry or company.

Speaker Change: and are an injustice to the incredible work our employees carry out for our customers.

Michael Rousseau: We look to being successful in the industry in an environment that have become more complex, complex, post-pandemic. Our success is contingent on having a strong and competitive business model, having experienced creative and nimble leadership team, and having employees who are proudly engaged to provide the best service possible. Our business model, which places the emphasis on building our major hubs to capture international and six-speed traffic, is ideal for our company and our geography. It creates value for all stakeholders. For example, it allows us to support more regional routes, which normally do not provide inadequate financial return, connecting communities to the rest of Canada and the world for both personal and business objectives.

Speaker Change: We accept accountability to our investors and to our stakeholders.

Speaker Change: We look to being successful in an industry and an environment that have become more complex post-pandemic.

Speaker Change: Our success is contingent on having a strong and cost-competitive business model, having an experienced, creative, and nimble leadership team, and having employees who are proudly engaged to provide the best service possible.

Mike Rousseau: Our business model, which places an emphasis on building our major hubs to capture international and six freedom traffic, is ideal for our company and our geography. It creates value for all stakeholders. For example, it allows us to support more regional routes, which normally do not provide an adequate financial return, connecting communities to the rest of Canada and the world for both personal and business objectives. However, some have criticized the cost of travel in Canada. To do so selectively without comparing the different and unique user pay model in Canada as compared to other jurisdictions is not only completely misleading and simplistic but is frankly disconcerting.

Speaker Change: Our business model, which places an emphasis on building our major hubs to capture international and six-stream traffic, is ideal for our company and our geography.

Speaker Change: It creates value for all stakeholders.

Speaker Change: For example, it allows us to support more regional routes, which normally do not provide an adequate financial return, connecting communities to the rest of Canada and the world for both personal and business objectives.

Michael Rousseau: Some have criticized the cost of travel in Canada. To do so selectively without comparing the different and unique user pay model in Canada as compared to other jurisdictions is not only completely misleading and simplistic, but frankly disconcerting. In addition, our Q2 unit costs, excluding fuel, have increased by over 22% from the second quarter of 2019, in part due to new government policies. Now, with standing, we are steadfast in our plans; we continue to invest in products and customer excellence, like our complimentary snack, spear, and wine offering, our winter sun network, and our strategic expansion into India.

Speaker Change: To do so selectively without comparing the different and unique user pay model in Canada as compared to other jurisdictions is not only completely misleading and simplistic, but frankly disconcerting.

Mike Rousseau: In addition, our Q2 unit costs, excluding fuel, have increased by over 22% from the second quarter of 2019, in part due to new government policy. Notwithstanding, we are steadfast in our plans. We continue to invest in products and customer excellence, like our complimentary snacks, beer, and wine offer, our Winter Sun Network, and our strategic expansion into India. We have also extended our partnership with the Canadian Olympic and Paralympic committees as Team Canada's official airline through 2030.

Speaker Change: In addition, our Q2 unit costs, excluding fuel, have increased by over 22% from the second quarter of 2019, in part due to new government policies.

Speaker Change: Notwithstanding, we are steadfast in our plans. We continue to invest in products and customer excellence, like our complimentary snacks, beer, and wine offering.

Speaker Change: Our Winter Sun Network, and our strategic expansion into India.

Michael Rousseau: We have also extended our partnership with the Canadian Olympic and Paralympic Committees, as Team Canada's official airline through 2030. It is truly an honor to carry our Canadian athletes to and from the Paris Games, and I celebrate all our athletes for their dedication and efforts leading up to and during the event.

Speaker Change: We have also extended our partnership with the Canadian Olympic and Paralympic committees as Team Canada's official airline through 2030.

Mike Rousseau: It is truly an honor to carry our Canadian athletes to and from the Paris Games, and I celebrate all athletes for their dedication and efforts leading up to and during the event. Aeroplane marked its 40th anniversary last month.

Speaker Change: It is truly an honour to carry our Canadian athletes to and from the Paris Games, and I celebrate all athletes for their dedication and efforts leading up to and during the event.

Michael Rousseau: Arrow Plan marked its 40th anniversary last month. Our award-winning program continues to grow, and active members are at an all-time high. Third-party growth buildings grew up 6% versus Q2 2023, mainly driven by growth across all financial partners, on increased purchase volume, and increased point conversions. We are carefully and continually monitoring customer behavior and market dynamics to ensure we maximize the opportunities of both growth and margin expansion into 2030.

Mike Rousseau: Our award-winning program continues to grow, and active members are at an all-time high. Third-party growth billings grew by 6% versus Q2 2023, mainly driven by growth across all financial partners on increased purchase volume and increased point conversion. We are carefully and continually monitoring customer behavior and market dynamics to ensure we maximize the opportunities of both growth and margin expansion into 2030. Market dynamics domestically and internationally continue to intensify with new entrants and lower cost business models. Some without the costly constraints imposed on Air Canada.

Speaker Change: AeroPlan marked its 40th anniversary last month. Our award-winning program continues to grow, and active members are at an all-time high.

Speaker Change: Third-party growth billings were up 6% versus Q2 2023, mainly driven by growth across all financial partners on increased purchase volume and increased point conversions.

Speaker Change: We are carefully and continually monitoring customer behavior and market dynamics to ensure we maximize the opportunities of both growth and margin expansion into 2030.

Michael Rousseau: Market dynamics domestically and internationally continue to intensify with new entrants and lower cost business models, some without the costly constraints imposed on Air Canada. We are transforming and shaping our company for the long term, keeping in mind that demands from various stakeholders in the short term.

Speaker Change: Market dynamics, domestically and internationally, continue to intensify with new entrants and lower-cost business models, some without the costly constraints imposed on Air Canada.

Mike Rousseau: We are transforming and shaping our company for the long term, keeping in mind the demands from various stakeholders in the shorter term. We are committed to our success, and we will update you on our plans in more detail within the next six months. We are investing in our fleet, network, people, and customer experience while maintaining a solid balance sheet and reducing our environmental footprint. We are building resilience and agility into our operations while enhancing our digital capabilities and innovation.

Speaker Change: We are transforming and shaping our company for the long term, keeping in mind the demands from various stakeholders in the shorter term.

Michael Rousseau: We are committed to our success, and we will update you on our plans in more detail within the next six months. We are investing in our fleet, network, people, and customer experience while maintaining a solid balance sheet and reducing our environmental footprint. We are building resilience in agility into our operations while enhancing our digital capabilities and innovation.

Speaker Change: We are committed to our success and we will update you on our plans in more detail within the next six months.

Speaker Change: We are investing in our fleet, network, people, and customer experience, while maintaining a solid balance sheet and reducing our environmental footprint.

Speaker Change: We are building resilience and agility into our operations while enhancing our digital capabilities and innovation.

Michael Rousseau: Yes, there are some steps needed to support this white path, like entering to new stages of certain labor agreements, which have to be cost competitive in the Canadian environment for us to be successful. I know all employees want a strong Air Canada, allowing it to grow, invest, and increase value for all stakeholders. Meanwhile, we will continue to adapt, make short term tactical adjustments as necessary to man course, with a focus objective to deliver value, both long term and short term.

Mike Rousseau: Yes, there are some steps needed to support this White Path, like entering into new stages of certain labor agreements, which have to be cost competitive in the Canadian environment for us to be successful. I know all employees want a strong Air Canada, allowing it to grow, invest, and increase value for all stakeholders. Meanwhile, we will continue to adapt, and make short-term tactical adjustments as necessary to remain on course with a focused objective to deliver value both long term and short. Like our shareholders, we're disappointed with our stock price performance year to date, especially coming off our record 2023 and having completely repaired the balance. We also know that most global airline stocks are experiencing similar challenges.

Speaker Change: Yes, there are some steps needed to support this flight path, like entering into new stages of certain labour agreements, which have to be cost competitive in the Canadian environment for us to be successful.

Speaker Change: I know all employees want a strong Air Canada, allowing it to grow, invest, and increase value for all stakeholders.

Speaker Change: Meanwhile, we will continue to adapt, make short-term tactical adjustments as necessary to remain on course, with a focused objective to deliver value, both long-term and short-term.

Michael Rousseau: Like our shareholders, we are disappointed with our stock price performance year-to-date, especially coming off our record 2023 and having completely repaired the balance sheet. We also know that most global airline stocks are having similar challenges. We are proud of our role as Canadians' Canada's flag carrier, and we are deeply committed to serving our customers, communities, and country with safety, care, and excellence.

Speaker Change: Like our shareholders, we're disappointed with our stock price performance year to date, especially coming off a record 2023 and having completely repaired the balance sheet.

Speaker Change: We also know that most global airline stocks are having similar challenges.

Mike Rousseau: We are proud of our role as Canada's flag carrier, and we are deeply committed to serving our customers, communities, and country with safety, care, and respect. We are equally proud and confident that we have everything we need to create value for all. Thank you, Marcie, and we will now be pleased to answer your questions.

Speaker Change: We are proud of our role as Canada's flag carrier, and we are deeply committed to serving our customers, communities, and country with safety, care, and excellence.

Michael Rousseau: We are equally proud and confident that we have everything we need to create value for all stakeholders. Thank you, Marcy. Marcy, and we will now be pleased to answer your questions.

Speaker Change: We are equally proud and confident that we have everything we need to create value for all stakeholders.

Speaker Change: Thank you, Marcie, and we will now be

Valérie Durand: Thank you, Mike, and thank you all for joining us this morning. Before we go forward with questions, we would like to welcome Sheila Kayuloum and her team to the call and also congratulate Helen Becker on her successful career. Helen, you have been a great model for women in the industry, and a warm welcome to Tom Fitzgerald.

Valérie Durand: Thank you, Mike. And thank you all for joining us this morning. Before we go forward with questions, we would like to welcome Sheila Kahyaoglu and her team to the call and also congratulate Helane Becker on her successful career. Helane, you have been a great model for women in the industry. And a warm welcome to Tom Fitzgerald. 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, Sarah. Thank you. If you would like to ask a question,

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

Speaker Change: Before we go forward with questions, we would like to welcome Sheila Cayullou.

Speaker Change: and her team to the call, and also congratulating Helane Becker on her successful career. Helane, you have been a great model for women in the industry, and a warm welcome to Tom Fitzgerald.

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?

Speaker Change: 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, Sarah.

Valérie Durand: Back to you, Sarah. Thank you.

Operator: Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. In the interest of time, we ask that you please limit yourself to one question and one follow-up question. Thank you.

Unknown Executive: If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again.

Sarah: Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. In the interest of time, we ask that you please limit yourself to one question and one follow up question. Thank you.

Unknown Executive: In the interest of time, we ask that you please limit yourself to one question and one follow-up question. Thank you.

Konark Gupta: Your first question comes from the line of Konark Gupta with Scotia Bank. Your line is open.

Operator: Your first question comes from the line of Konark Gupta with Scotiabank. Your line is open. I'm sorry, your first question comes from the line of Matthew Lee of Canaccord Genuity. Your line is open. Sorry, Asabi Sith, Raymond James, your line is open.

Speaker Change: Your first question comes from the line of Konark Gupta with Scotiabank. Your line is open.

Matthew Lee: I'm sorry. Your first question comes from the line of Matthew Lee of Canacard Januity.

Unknown Executive: Your line is open. I'm sorry.

Fadi Chamoun: A sabby sits, Raymond James. Your line is open. Hey, good morning, everyone. Can you hear me? Yeah, good morning. Good morning. Thanks.

Speaker Change: Sorry, Asabi Sith, Raymond James, your line is open.

Unknown Attendee: Hey, good morning, everyone. Can you hear me? Yeah, good morning. Good morning. Good morning. Thanks.

Asabi Sith: Hey, good morning, everyone. Can you hear me?

Fadi Chamoun: I was wondering if you mentioned strength in the corporate market in the US, Canada. Could you talk a little bit in general on what you're seeing on the corporate side? Because clearly, you know, some of the concerns about the economy are probably related to that as well. And curious as to how corporate today looks versus kind of pre-pandemic, I suspect that there's a much smaller mix of your overall rather music than it was back then. Thanks.

Mark Galardo: I was wondering if you mentioned strength in the corporate market in the U.S. and Canada, but could you talk a little bit in general about what you're seeing on the corporate side? Because clearly, some of the concerns about the economy are probably related to that as well. I'm curious as to how corporate today looks versus pre-pandemic. I suspect that there's a much smaller mix of your overall revenues than there was back then. Thank you.

Asabi Sith: I was wondering if you mentioned strength in the corporate market in the U.S., Canada, but could you talk a little bit in general on what you're seeing on the corporate side?

Mark Galardo: Good morning. So our overall corporate for the quarter basically grew about 4%. And most of that came from the Canada US sector. And, you know, summer travels are normally not a very important period for corporate travel. So really, what we're looking at is September and October, and we continue to see momentum in terms of the corporate recovery, particularly in the Canada US sector.

Fadi Chamoun: Good morning, Abby. So we are our corporate overall for the quarter basically grew about 4%, and most of that came on the Canada US sector. And, you know, summer travels to summer periods to normally not a very important period for corporate travel. So really what we're looking at is September, October, and we continuously momentum in terms of the corporate recovery, particularly on the Canada US sector. That being said, we're still, you know, about 25 to 30% below where we were in 2019. And the big question that, you know, we're now asking ourselves is to what extent some of the network challenges that we have in terms of fleet contributing to that.

Speaker Change: Good morning, Tavi.

Speaker Change: So we are our corporate overall for the for the quarter basically grew about four percent and most of that came on

Speaker Change: on the Canada-U.S. sector.

Speaker Change: and, you know,

Speaker Change: Summer travel, summer periods are normally not a very important period for corporate travel, so really what we're looking at is September and October , and we continue to see momentum in terms of the corporate recovery, particularly on the Canada-U.S. sector.

Mark Galardo: That being said, we're still, you know, about 25 to 30% below where we were in 2019, and the big question that we're now asking ourselves is to what extent some of the network challenges that we have in terms of fleet are contributing to that, and that's a bit of an exercise that we're conducting internally because some of our schedules have to facilitate same-day business travel. So a bit of a review internally as well to make sure that we're well set up, you know, to stimulate the corporate recovery as well.

Fadi Chamoun: And that's a bit of an exercise that we're conducting internally because some of our schedules have to facilitate same-day business travel. So a bit of a review internally as well to make sure that we're well set up, you know, to stimulate the corporate recovery as well. So thank you.

Mark Galardo: That was helpful. Thank you. And if I might, on the capacity plans, could you flesh out a little bit more as to kind of what your expectations are into the second half and maybe into next year, as you kind of with the current kind of fleet plan, where you expect the growth to be focused in the various regions?

Fadi Chamoun: And if I might, on the capacity plans, could you flesh out a little bit more as to kind of what your expectations are into the second half and maybe into next year as you can have with the current kind of fleet blend where you expect the growth to be focused in the various regions. So 4Q4, you know, Lake Q3Q4, we're looking at around 5% growth, and the majority of that growth is going to be on the Pacific sector. We'll see some strengths. We're also investing a bit into India. We've reduced our exposure to Europe, so basically flat to slightly negative.

Mark Galardo: So for Q4, you know, late Q3, Q4, we're looking at around 5% growth, and the majority of that growth is going to be in the Pacific sector, where we see some strengths. We're also investing a bit into India. We've reduced our exposure to Europe, so we're basically flat to slightly negative. And we're now taking another look at our domestic capacity for Q4. Too early to say exactly what 2025 will look like.

Speaker Change: So for Q4, late Q3-Q4, we're looking at around 5% growth.

Speaker Change: And the majority of that growth is going to be on the Pacific sector, where we see some strengths. We're also investing a bit into India. We've reduced our exposure to Europe , so we're basically flat to slightly negative. And we're now taking another look at our domestic capacity for Q4.

Fadi Chamoun: And we're now taking another look at our domestic capacity for 4Q4.

Fadi Chamoun: Too early to say exactly what 2025 will look like right now. I appreciate that answer.

Speaker Change: Too early to say exactly what 2025 will look like right now.

Unknown Attendee: I appreciate the answers. Thank you.

Conor Gupta: Thank you. Your next question comes from the line of Conor Gupta with Scotia Bank. Your line is open. Hi, thanks. Hopefully, you can hear me okay this time. Yeah, great, thank you.

Operator: Your next question comes from the line of Konark Gupta with Scotiabank. Your line is open.

Speaker Change: I appreciate the answers. Thank you.

Speaker Change: Your next question comes from the line of Konark Gupta with Scotiabank. Your line is open.

Unknown Attendee: All right, thanks. Hopefully, you can hear me okay this time.

Unknown Attendee: Great, thank you. So I just want to understand the demand environment and the yield environment a little bit. Back in May, I think you guys were expecting the strong Pacific yields to continue or sustain through the summer. But we saw in Q2, I think there was some weakness there. Though you seem satisfied, especially Mark, with the capacity pivot to Asia Pacific. So, you know, are you expecting, you know, like if you keep capacity intact in the Pacific, are you expecting demand to sort of catch up here? Or would you expect some sort of, you know, competitive capacity to pull back?

Conor Gupta: So I just want to understand the the demand and why I'm in the yield and why I'm a little bit here. Back in May, I think, you guys were expecting the strong Pacific yields to continue or sustain the summer, but we saw in Q2, I think there was some weakness there. Though you seem satisfied this much more with the capacity pivot to Asia Pacific. So, you know, are you expecting, you know, like if we keep capacity intact and Pacific, are you expecting demand to sort of catch up here, or would you expect some sort of, you know, competitive capacity to pull back?

Mark Galardo: Yeah, good question, Conor. So in terms of the yield decline on the Pacific, I think it's a question of comparison. I mean, the base last year was unrealistically high. That being said, even if we suffered a yield rise and decline in Q2 in the Pacific, from a profitability perspective, we're very satisfied. In fact, most of our Pacific routes are some of the best routes that we fly from a profitability point of view. That being said, capacity returning to that sector also depends on the outcome of, you know, China. Too early to comment on that.

Conor Gupta: Yeah, good question, Connor. So, in terms of the yield decline on the Pacific, I think it's a question of the compares. I mean, the base last year was, you know, unrealistically high. That being said, even if we suffered a yield rise in the quantity Q2 and the Pacific from a profitability perspective, we're very satisfied. In fact, most of our Pacific groups are some of the best ones that we fly from a profitability perspective. That being said, you know, capacity returning to that sector also depends on the outcome of, you know, China to really to comment on that.

Speaker Change: Yeah, good question, Konark. So in terms of the yield decline on the Pacific, I think it's a question of the compares. I mean, the base last year was

Speaker Change: Unrealistically high. That being said, even if we suffered a yield rise and decline in Q2 in the Pacific, from a profitability perspective, we're very satisfied. In fact, most of our Pacific routes are some of the best routes that we fly from a profitability perspective.

Speaker Change: That being said, you know, capacity returning to that sector also depends on the outcome of, you know, China, too early to comment on that. But overall, we expect things to be stable on the Canada-Pacific sector. And in terms of capacity growth,

Mark Galardo: But overall, we expect things to be stable in the Canada-Pacific sector, and in terms of capacity growth, while we have a bit of a bump in Q4, for 2025, we expect capacity growth to be moderate, you know, at best, on the Pacific.

Conor Gupta: But overall, we expect things to be stable on the kind of Pacific sector in terms of capacity growth.

Conor Gupta: While we have a bit of a bump in Q4, for 2025, we expect capacity growth to be moderate, you know, at best, on the Pacific. Okay, that's great.

Speaker Change: While we have a bit of a bump in Q4, for 2025, we expect capacity growth to be moderate, at best, on the Pacific.

John D. Burt: Okay, that's great. And if I can follow up with John, perhaps on CapEx. So seems like this about a billion dollars plus of CapEx got pushed out to the 2027 timeframe, and it seems to be driven more so by the 787-10 perhaps. How much of that is by design versus by OEM issues that you're seeing? And are you baking in any sale lease back assumptions in future CapEx?

John Bert: And if you can follow up with John, perhaps on CapEx, so seems like this about a billion dollar plus of CapEx got pushed out to a 2027 time frame. And it seems to be driven more so by the 787-10; perhaps how much of that is by design versus by OEM issues that you are seeing. And are you baking in any CLDs back assumptions in future, CapEx? So yes, so no, no new assumptions to respect the sales leads back. I mean, those will be options that alternatives in terms of the financial capital look at in the future, but with respect to any of the changes here and no changes.

Speaker Change: Okay, that's great. And if I can follow up with John , perhaps on

John: CapEx. So seems like this about a billion dollar plus of CapEx got pushed out to a 2027 time frame.

Speaker Change: And it seems to be driven more so by the 787-10, perhaps. How much of that is by design versus by OEM issues that you're seeing, and are you baking in any sale-leaseback assumptions in future CAPEX?

John D. Burt: So, yeah, so no new assumptions with respect to sales leasebacks. I mean, those will be options that alternatives in terms of financing aircraft will look at in the future. But with respect to any of the changes here, there will be no changes.

Speaker Change: So yeah, so no, no new assumptions with respect to sales leasebacks. I mean, those will be options that alternatives in terms of financing aircraft will look at in the future, but

Speaker Change: with respect to any of the changes here no no changes

John Bert: And I'd say to make some in some, you know, we work with Boeing all the time. And of course, we want to make sure that we can rely on the capacity. And so just having that planned out so that we can incorporate it and they can deliver it on time. And that's kind of the thinking behind the movement of the 77. Okay, that's great. Thanks for taking my questions.

Unknown Attendee: And I'd say it's a mix, some and some. You know, we work with Boeing all the time. And, of course, we want to make sure that we can rely on the capacity. And so just having that planned out so that we can incorporate it, and they can deliver it on time. And that's kind of the thinking behind the movement of the 77.

Speaker Change: And I'd say it's a mix, some and some, you know, we work, we work with Boeing all the time. And of course, we want to make sure that we can rely on the capacity. And so just having that planned out so that we can incorporate it and they can deliver it on time. And that's kind of the thinking behind the movement of the 787s.

Unknown Attendee: Okay, that's great. Thanks for taking my questions. Thank you.

Matthew Lee: Thank you. Your next question comes from the line of Matthew Lee with Canaccord Genuity. Your line is open. And morning, thanks for taking my question. Maybe more of a big picture one. I know there are a number of factors that go into it. But, you know, prior to the pandemic, AC was sort of running at 18 to 19% even in margin. And I think at your investor day, a couple of years back, it was suggested you kind of get back to those levels.

Operator: Your next question comes from the line of Matthew Lee with Canaccord Genuity. Your line is open.

Speaker Change: Okay, that's great. Thanks for taking my questions. Thank you.

Speaker Change: Your next question comes from the line of Matthew Lee with Canaccord Genuity. Your line is open.

Unknown Attendee: Good morning. Thanks for taking my question. Maybe it's more of a big picture one. I know there are a number of factors that go into it. But, you know, prior to the pandemic, AC was sort of running an 18 to 19% EBITDA margin. And I think at your investor day a couple years ago, it was suggested you kind of get back to those levels. I mean, given pilot cost inflation, some other cost inflation, and maybe some pressure on capacity, is that still the medium-term goal? Or are we maybe in for a new normal for the airline?

Matthew Lee: Good morning, thanks for taking my question. Maybe more of a big picture one. I know there are a number of factors that go into it, but

Matthew Lee: You know, prior to the pandemic, AC was sort of running an 18 to 19% EBITDA margin, and I think at your Investor Day a couple years back.

Michael Rousseau: I mean, given pilot cost inflation, some other cost inflation, maybe suppression and capacity, is that still the medium-term goal? Or are we maybe in for a new normal for the airline? I, you know, what I think that the other year line is capable of bringing margins to the high teams. And, you know, we won't kind of... I won't put a number out there right now for longer term, but I would tell you that we're working through here, a yielding environment that's kind of compressed a little bit so that obviously has some immediate impacts, and we're also working through a mic set in his comments, but you all know an environment that has brought, you know, quite a bit of cost on.

Speaker Change: It would suggest that you kind of get back to those levels. I mean, given pilot cost inflation, some other cost inflation, maybe some pressure on capacity, is that still the medium term goal or are we maybe in for a new normal for the airline?

John D. Burt: I think that the airline is capable of bringing margins to the high teens and, you know, we won't kind of I won't put a number out there right now for the longer term, but I would tell you that we're working through here a yielding environment that's kind of compressed a little bit. So that obviously has some immediate impacts, and we're also working through, as Mike said in his comments, but you all know, an environment that has brought, you know, quite a bit of cost. We're still not back to 2019 levels in terms of scale and the size of the airline. I think that'll make a big difference.

Speaker Change: I you know what I think that the airline is capable of bringing margins to the high teens and you know we won't kind of

Speaker Change: I won't put a number out there right now for longer term, but I would tell you that we're working through here a yielding environment that's kind of compressed a little bit. So that obviously has some immediate impacts and we're also working through a, Mike said in his comments, but you all know, an environment that has brought, you know, quite a bit of cost on.

Michael Rousseau: We're still not back to 2019 levels in terms of scale and the size of the airline. I think that'll make a big difference. You've got a modern fleet of aircraft that's kind of being developed and deployed over the next three to four years, so the CAPEX is going to count, and it's going to count to expanding those margins. And we still offer, you know, the best product for Canadian travelers, and that will continue to deliver value and, you know, with a lot of other components that we do leverage, like Aeroplan and different parts of our business and franchises that can grow faster than GDP.

Mike: We're still not back to 2019 levels in terms of scale and the the size of the airline. I think that'll make a big difference

John D. Burt: We've got a modern fleet of aircraft that's being deployed over the next three to four years. So the CapEx is going to count, and it's going to count for expanding those margins. And we still offer, you know, the best product for Canadian travelers, and that will continue to deliver value and, you know, a lot of other components that we do leverage, like Aeroplan and different parts of our business and franchises that can grow faster than GDP. So a combination of all that, to me, just confirms the fact that, yeah, sure, today, you know, a little bit compressed, but over a longer period, the ability to go back to strong margins.

Mike: You've got a modern fleet of aircraft that's kind of being deployed over the next three to four years, so the CAPEX is going to count.

Mike: and it's going to count to expanding those margins.

Mike: and we still offer, you know, the best product for Canadian travellers.

Mike: And that will continue to deliver value and, you know, a lot of other components that we do leverage like AeroPlan and different parts of our business and franchises that can grow faster than GDP. So a combination of all that, to me, just confirms the fact that, yeah, sure, today, you know, a little bit compressed.

Michael Rousseau: So a combination of all that to me just confirms the fact that you have sure today, you know, a little bit compressed, but over the longer period, the ability to go back to the strong margins.

Mike: But over a longer period, the ability to go back to the strong margins.

Michael Rousseau: Hence, I, in your view, do you believe that it's more of a yield kind of conversation or, you know, more of a cost management conversation in terms of returning to that 18 to 19%? Well, I think it's both. I think the piece of it that we control is driving scale and productivity. You know, 2019 and the period in between the effect productivity quite a bit. We're growing back into the airline size that we once had. Like I said, still below 2019 levels, a modern fleet of aircraft, a lot of very important technology investments for making an IT that will drive productivity.

John D. Burt: I'm sorry, but in your view, do you believe that it's more of a yield kind of conversation or, you know, more of a cost management conversation in terms of returning to that 18 to 19%?

Speaker Change: I'm sorry in your view do you believe that it's more more of a yield kind of conversation or you know more of a cost management conversation in terms of returning to that 18 to 19 percent?

John D. Burt: Well, I think it's both. I think the piece of it that we control is driving scale and productivity. You know, 2019 and the period in between did affect productivity quite a bit. We're going back to the airline size that we once had, like I said, still below 2019 levels. A modern fleet of aircraft, and a lot of very important technology investments we're making in IT that will drive productivity. So a combination of all those things, a large modern fleet and productivity are the pieces that we control to drive a very competitive cost structure. And of course, over time, we'll kind of, you know, stabilize here and work our way through that. And I'm sure that'll contribute as well on the yield side.

Speaker Change: Well, I think it's both. I think the piece of it that we control.

Speaker Change: is driving scale and productivity, you know, 2019 and the period in between did affect productivity quite a bit. We're going back into the airline size that we once had, like I said, still below 2019 levels.

Speaker Change: A modern fleet of aircraft, a lot of very important technology investments we're making in IT that will drive productivity.

Michael Rousseau: So a combination of all those things, scale, modern fleet and productivity are the pieces that we control to drive, to drive a very competitive cost structure. And of course, over time, you know, we'll kind of, you know, stabilize here and work our way through that, and I'm sure that will contribute as well on the yield side.

Speaker Change: So a combination of all those things.

Speaker Change: scale modern fleet and productivity are the pieces that we control to drive a very competitive cost structure. And of course, over time, you know, we'll kind of, you know, stabilize here and work our way through that. And I'm sure that'll contribute as well on the yield side.

Michael Rousseau: All right, that's very helpful.

Unknown Attendee: All right, that's very helpful. Thank you very much.

Michael Rousseau: Thank you much.

Stephen Trent: Our next question comes from the line of Stephen Trent with City. Your line is open. Good morning, everyone, and thanks very much for taking my questions. Some high level ones for you, definitely appreciate your comments on fifth and sixth freedom traffic opportunities and the Star Alliance strings. Could you envision kind of longer term doing anything kind of joint business agreement style? Could you possibly see any opportunities to do something like that?

Operator: Our next question comes from the line of Stephen Trent with Citi. Your line is open.

Speaker Change: All right, that's very helpful. Thank you so much.

Speaker Change: Our next question comes from the line of Stephen Trent with Citi. Your line is open.

Unknown Attendee: Good morning, everyone, and thanks very much for taking my questions. I have some high-level ones for you.

Stephen Trent: Good morning, everyone, and thanks very much for taking my questions, some high-level ones for you. Definitely appreciate.

Stephen Trent: Your comments on fifth and sixth freedom traffic opportunities and and the Star Alliance strength Could you envision kind of longer term doing anything kind of joint business agreement style? Could you possibly see any opportunities? To do something like that

Stephen Trent: Hi.

Stephen Trent: Hi Stephen. With respect to joint ventures and joint business, we already have one with Wisconsin United across the North Atlantic called It Plus Plus. And we have a joint business arrangement with United on the county US sector and one with our China to China. So we already have quite a few joint business arrangements today. I appreciate it. And I actually meant to ask any incremental and addition of the ones you have, but that's very clear. And appreciate the color.

Speaker Change: Hi, hi Stephen. With respect to joint ventures and joint business, we already have one with Lufthansa and United across the North Atlantic called A++ and

Speaker Change: We have a joint business arrangement with United on the Canada-U.S. sector and one with Air China to China, so we already have quite a few joint business arrangements.

Speaker Change: Good night.

Speaker Change: Appreciate it. And I actually meant to ask any incremental in addition to the ones you have, but that's very clear. Yeah.

Stephen Trent: And sorry, just one other quick item. Also appreciate that. You guys have seen some good improvement in flight completion factors and lower delays, and what have you. Have you changed anything, made any specific adjustments on your boarding process, or are there technological factors behind that that have supported that improvement? Thank you.

Speaker Change: And appreciate the color.

Speaker Change: I'm sorry, just one other quick item. I also appreciate that.

Speaker Change: You guys have seen...

Speaker Change: You know, some good improvement in

Speaker Change: flight completion factors and lower delays and what-have-you.

Unknown Attendee: I definitely appreciate your comments on Fifth and Sixth Freedom traffic opportunities and the Star Alliance strengths. Could you imagine, for the long term, doing anything kind of of joint business agreement style? Could you possibly see any opportunities to do something like that?

Craig Landry: Hi, Stephen, this is Mike. Good question.

Unknown Executive: Hi Stephen. With respect to joint ventures and joint business, we already have one with Lufthansa and United across the North Atlantic called A++. And we have a joint business arrangement with United in the Canada-US sector and one with Air China in China. So we already have quite a few joint business arrangements today.

Craig Landry: I'm going to turn that over to Craig Landry, who heads up operations, sitting in the room. Good morning. Yeah, we have a program that we've been working on for a few years now that we call ECX, which is both elevating the customer experience and the two main areas that we have focused on that have been around on-time performance and disruption management. So there's been a lot of initiatives in place that includes a lot of technology, self-service. And digital capability improvements, which allow the customer to be able to handle more aspects of their servicing on their own.

Speaker Change: Hi Stephen, it's Mike. Good question. I'm going to turn that over to Craig Landry who heads up operations sitting in the room.

Unknown Attendee: Appreciate it. And I actually meant to ask any additional incremental questions in addition to the ones you have, but that's very clear. Yeah, and I appreciate the color. I'm sorry, just one other quick item. I also appreciate that.

Unknown Attendee: You guys have seen, you know, some good improvement in flight completion factors and lower delays. And what have you done? Have you changed anything? Made any specific adjustments to your boarding process? Or are there technological factors behind that that have supported that improvement?

Craig Landry: This eliminates a lot of time and friction within the operation. We've made changes to a variety of aspects of our airport operations, both in the terminal.

Unknown Attendee: Thank you.

Craig Landry: You mentioned boarding. We made changes to how we handle everything from boarding sequencing to carry-on baggage handling and others below the wing. How we handle baggage loading and pushback processes on the tarmac. So there's a fairly comprehensive program, and it's led to about a 10 point improvement year over year in on-time performance this year. So we see are seeing a significant improvement from that. There are a variety of efficiencies that come from that as well. I mean, there's, you can envision, you know, less miss handled baggage, less delay, compensation costs, and so on and so forth.

Mike Rousseau: Hi Stephen, it's Mike. Good question. I'm going to turn that over to Craig Landry who heads up operations sitting in the room.

Craig Landry: So we see that as a win win win win.

James McGarragle: Okay, very helpful, and thank you for taking my questions. Your next question comes from the line of James McGarregal with RBC Capital Markets. Your line is open. Good morning, and thanks for having me on. Can you give us some color on your new cost guidance? I mean, Q2 came in really, really good. Anything to flag specifically in the quarter and then more generally on 2024 that range got a lot tighter on lower capacity. Can you just give us some color and what’s driving that?

Speaker Change: Your next question comes from the line of James McGarrickle with RBC Capital Markets. Your line is open.

Craig Landry: Good morning. Yeah, we have a program that we've been working on for a few years now that we call ECX, which is about elevating the customer experience. And the two main areas that we have focused on have been around on-time performance and disruption management. So, there have been a lot of initiatives in place that include a lot of technology, self-service, and digital capability improvements, which allow a customer to be able to handle more aspects of their service on their own.

Craig Landry: This eliminates a lot of time and friction within the operation. We've made changes to a variety of aspects of our airport operations, both in the terminal, as you mentioned boarding, we've made changes to how we handle everything from boarding sequencing to carry on baggage handling and others. Below the wing, how we handle baggage loading and pushback processes on the tarmac.

James McGarrickle: Hey, good morning, and thanks for having me on.

James McGarrickle: Can you give us some color on your new cost guidance?

James McGarrickle: Q2 came in really, really good. Anything to flag specifically in the quarter? And then more generally on 2024, the range got a lot tighter on lower capacity. Can you just give us some color on what's driving that?

John Bert: Yeah, so thanks for a question. I think it's just we've, you know, we've continued and we'll continue to be a disappointment as we kind of progress to the first half of the year. We've been, you know, very careful with adding headcount, and we've gotten, you know, some good productivity overall. We, you know, we rely on that as the capacity adds, and that allows us to contribute some dilution to the it to the chasm. I think, you know, the range of being tighter is just we had a two and a half to four and a half percent range.

Craig Landry: So, it's a fairly comprehensive program, and it's led to about a 10-point improvement year over year in on-time performance this year. So, we are seeing a significant improvement from that. And there are a variety of efficiencies that come from that as well. I mean, you can imagine less mishandled baggage, less delay, compensation costs, and so on and so forth. So, we see that as a win-win-win

Speaker Change: As we progress through the first half of the year, we've been very careful with adding headcount and we've gotten some good productivity overall. We rely on that as the capacity adds and that allows us to contribute.

Speaker Change: some dilution to the to the chasm. I think you know the range being tighter is just we had a two and a half to four and a half percent range we're tracking well on cost as the year progresses and it allows us to kind of take the top end of the range out.

John Bert: We're tracking well and cost as the year progresses, and it allows us to kind of take the top end of the range out. And I mentioned in my comment as well, a little bit of delay and some of the the policies that we're anticipating on APPR, so that which is all a little bit of cost. But all this to say that, you know, I think we're executing well with respect to the ramp up in productivity relative to the capacity. I appreciate the color.

Speaker Change: And I mentioned in my comments as well, a little bit of delay in some of the policies that we were anticipating on APPR, so that pushes out a little bit of cost.

Speaker Change: All this to say that, you know, I think we're executing well with respect to the ramp up in productivity relative to the capacity we added.

Michael Rousseau: And I saw an interesting announcement this morning that you were part of a consortium bidding on a concession for a via traffic. You just give us an update on the strategy there. You know, any potential traffic that lays related to that and anything, you know, altitude flags surrounding that and that you think is pertinent.

Mark Barbeau: Thank you. Good morning. It's Mike. Very interesting project.

Unknown Attendee: Okay, very helpful. And thank you for taking my questions.

Mark Barbeau: I'm going to turn over to Mark Barbeau or Chief Legal Officer who's been leading that opportunity. Good morning. And thank you for the question. We're part of a group of companies that is bidding for this project. It's a very important project for Canada. But at this point in time of the process, we're unable to comment in any way, shape, or performance, a very strict and rigorous bidding process that is being led by the federal government. But we can confirm, as you've seen, that we are part of the Cadence consortium, which is being led. It's been led by CDPQ in front.

Speaker Change: Good morning, it's Mike. Very interesting project. I'm going to turn over to Mark Barbeau, our Chief Legal Officer, who's been leading that opportunity.

Operator: Your next question comes from the line of James McGarragle with RBC Capital Markets. Your line is open.

Unknown Attendee: Hey, good morning, and thanks for having me on. Can you give us some color on your new cost guidance? I mean, Q2 came in really, really good. Anything to flag specifically in the quarter? And then, more generally, on 2024, the range got a lot tighter on lower capacity. Can you just give us some color on what's driving that?

Mark Marbol: We're part of a group of companies that is bidding for this project. It's a very important project for Canada.

Mark Marbol: But at this point in time of the process, we're unable to comment in any way, shape or form. It's a very strict and rigorous bidding process that is being led by the federal government. But we can confirm, as you've seen, that we are part of the Cadence Consortium, which is being led by CDTQ Infra.

Mark Barbeau: And I'll just close on. You had a question on Catholics. There's no significant commitment of Capitol or Catholics envisioned at this time. So, yeah, it doesn't come with any meaningful deployment of Capitol.

Mark Marbol: And I'll just close on, you had a question on CapEx. There's no significant commitment of capital or CapEx to envision at this time. So, yeah, it doesn't come with any meaningful deployment of capital.

Chris Murray: Your next question comes from the line of Chris Murray with ATB Capital Markets. Your line is open. Yeah, thanks, folks. Good morning. Maybe turning back to the Atlantic and trying to understand a little bit about what's going on there. Can you maybe break it down a little more granularly between business and leisure traffic, and maybe is there other particular regions where you're seeing some of these challenges. And we're just trying to understand, you know, is this called the conventional peers that you're having issues with in terms of excess capacity, or is there, you know, like a low cost carrier, something else going on.

John D. Burt: Yeah, so thanks for the question. I think it's just we've continued and will continue to be disciplined. And as we kind of progress through the first half of the year, we've been, you know, very careful with adding headcount, and we've gotten, you know, some good productivity overall. We rely on that as capacity increases and allows us to contribute some dilution to the chasm. I think, you know, the range being tighter is just because we had a two and a half to four and a half percent range.

Speaker Change: Can you maybe break it down a little more granularly between business and leisure traffic and maybe is there, are there particular regions where you're seeing some of these challenges? And we're just trying to understand, you know, is this called the conventional peers that you're having issues with?

Chris Murray: We just try to understand the dynamics that you're seeing in that market. And then, as part of that, some of your competitors have also called up the fact that, you know, a number of travelers have decided to try to avoid France during the Olympics. But just wondering if that also creates an opportunity, you know, once that's over for picking up some additional load, maybe in the September timeframe.

Speaker Change: But just wondering if that also creates an opportunity, you know, once that's over, for picking up some additional load, maybe in the September timeframe.

John D. Burt: We're tracking well on cost as the year progresses, and it allows us to kind of take the top end of the range out. And I mentioned in my comments as well that there was a little bit of delay in some of the policies that we were anticipating on APPR. So that pushes out a little bit of cost. But all this to say that, you know, I think we're executing well with respect to the ramp-up in productivity relative to the capacity we add.

Chris Murray: Sure. Good morning, Chris. So if we break down the Atlantic, this is kind of multiple components here. So firstly, leisure, strength, you know, point of sale, Canada, point of sale, US to, you know, the Mediterranean Europe in general is pretty strong. We're looking at demand that's five or six percent better year over year in terms of absolute demand. And we're seeing a lot of strength in the markets, like, you know, Italy, Greece, Portugal, you know, South of France, etc., like we did last year. What we saw in particular is poor Europe, you know, markets like France, Germany, you know, where there's a significant point of sale Europe component; you know, that was quite weak.

Unknown Attendee: I saw an interesting announcement this morning that you were part of a consortium bidding on a concession for via traffic. Can you give us an update on the strategy there? Any potential capex outlays related to that? Anything else you'd flag surrounding that announcement that you think is pertinent?

Speaker Change: Sure. Good morning, Chris. So if we break down the Atlantic, there's kind of multiple components here. So firstly, leisure, strength, you know, point of sale Canada, point of sale U.S.

Speaker Change: to you know the Mediterranean Europe in general is pretty strong. We're looking at demand that's five or six percent better year-over-year in terms of absolute demand and we're seeing a lot of strength in the markets like you know Italy, Greece, Portugal.

Speaker Change: South of France, et cetera, like we did last year. What we saw in particular is core Europe, markets like France, Germany, where there's a significant point-of-sale Europe component, that was quite weak.

Chris Murray: You know, one, the European economy is, you know, you know, kind of stagnate right now. Secondly, to your point, the Olympics and a bit of the Euro soccer tournament all contributed to some of those declines. And as well, you know, there was a lot of additional capacity on the North Atlantic in general. You know, so the amount, while the man was up, you know, supply was larger than the demanding. race. So that being said, what we're seeing in September, October is definitely a rebound in France. Like, you know, that's September, October, and November; December is a little bit too early right now to call.

Speaker Change: but you know that's for September , October , November , December is a little bit too early right now to call but in particular you know demand to to the Mediterranean really really held up and we'll be looking to do a little bit more of that in 2025.

Chris Murray: But in particular, you know, demand to the Mediterranean really, really held up, and we'll be looking to do a little bit more of that in 2025. Okay.

Chris Murray: That's helpful.

Chris Murray: And then just one other question.

Chris Murray: You know, you're in the process right now, of course, of negotiations with your pilots. And I appreciate the sensitivities around this.

Speaker Change: Okay, that's helpful. And then just one other question. You know, you're in the process right now, of course, of negotiations with your pilots. And I appreciate the sensitivities around this, but just trying to understand maybe any key milestones,

Chris Murray: But just trying to understand, and maybe any key milestones in the process that we should be thinking about, timing around where you guys feel that an agreement to be reached. So any color you could add that would be helpful.

Speaker Change: In the process that we should be thinking about, timing around where you guys feel that an agreement can be reached, so many colours you could add that would be helpful.

Michael Rousseau: Sure, Chris, this mic. Yeah, we've actually posted all the up-to-date information on our web. And it's really right now where the process being overseen by a federal conciliator. And so we're in negotiations right now. And again, this is under the review or under the guidance of a federal conciliator. We have a reach agreement on several items. There's more to I'll see that.

Mike Rousseau: Thank you. Good morning, it's Mike. Very interesting project. I'm going to turn it over to Mark Barbeau, our Chief Legal Officer, who's been leading that opportunity. Good morning, and thank you for the question. We're part of a group...

Mike Rousseau: Good morning, it's Mike. Very interesting project. I'm going to turn it over to Mark Barbeau, our Chief Legal Officer, who's been leading that opportunity. Good morning, and thank you very much.

Mike: Sure Chris, it's Mike.

Mike: Yeah, we've actually posted all the up-to-date information on our web, and it's really right now we're in the process of being overseen by a federal conciliator, and so we're in negotiations right now.

Cameron Dorkson: Thanks, folks. Your next question comes from the line of Cameron Dorkson with National Bank Financial. Your line is open. Yeah, thanks. Good morning.

John D. Burt: And I'll just close on you had a question about CapEx; there's no significant commitment of capital or CapEx to imagine at this time. So yeah, doesn't come with any meaningful deployment of capital.

Speaker Change: All right, that's helpful. Thanks, folks.

Speaker Change: Your next question comes from the line of Cameron Doerksen with National Bank Financial. Your line is open.

Operator: Your next question comes from the line of Chris Murray with ATB Capital Markets. Your line is open.

Cameron Dorkson: I just want to maybe you could go into a little more detail on what you're seeing from competitive capacity as we head into the fall here. I mean, you guys have basically said that you're going to you'll take your capacity down a little bit here. Just wondering where you see from some of the. Is there been an adjustment made there as well?

Cameron Doerksen: Yeah, thanks. Good morning. I just wonder, maybe you could go into a little more detail on what you're seeing from competitive capacity as we head into the fall here. I mean, you guys have basically said that you're going to, you know, take your capacity down a little bit here. Just wondering what you see from some of the competitors. Has there been an adjustment made there as well?

Cameron Dorkson: Good morning, Cameron. So on the North and Atlantic in particular, like to Europe, we see some discipline. What we have seen is growth in India in particular. Just recently, you know, Air India announced double daily service between Toronto and Delhi. So there's some capacity there. On the domestic side, we see some growth from some of our competitors, but in particular, you know, we see some of our competitors put capacity into the US and some markets. And that's normal as we chase kind of the seasonal patterns here in Canada that our competitors move some of that capacity into those regions where there's, you know, a shift in demand.

Speaker Change: So on the North Atlantic in particular, like to Europe , we see some discipline.

Speaker Change: Growth in India in particular just recently, you know, Air India announced double daily service between Toronto and Delhi. So there's there's some capacity there on the on the domestic side We see some some growth from some of our competitors, but in particular You know, we see some of our competitors put capacity into the US and some markets

Cameron Dorkson: Okay.

Unknown Attendee: Yeah, thanks, folks. Good morning.

Cameron Dorkson: And you know, second question, just on your own capacity. I'm just trying to square a couple of things. Your one is, you know, just in light of what there appears to be, you know, maybe too much capacity out there in the multiple markets. But at the same time, if I look at your fleet plan, you know, you're adding some of these seven, three, seven Maxes. I mean, I see a couple of seven, six, seven passenger planes coming back in 2025. So I'm just trying to understand the rationale there. Is that more a backfill? Because you've got some of these supply chain related engine issues, or is that, you know, just, you know, capacity that you think will be necessary as we look ahead to 2025?

Speaker Change: Okay. And, you know, second question, just on your own capacity, I'm just trying to square a couple of things here. One is,

Unknown Attendee: Um, maybe turning back to the Atlantic and trying to understand a little bit about what's going on there. Can you maybe break it down a little more granularly between business and leisure traffic? And maybe there are, are there particular regions where you're seeing some of these challenges? And we're just trying to understand, you know, are these called the conventional peers that you're having issues with, in terms of excess capacity? Or is there, you know, like a low cost carrier or something else going on?

Speaker Change: your capacity that you think will be necessary as we look ahead to 2025.

Michael Rousseau: Thanks for combination of everything. And in particular, you know, we're not at 2019 level. Look at that. actually yet. We still project some demand growth into 2025. And as well, we want to continue, you know, executing on some of strategic pillars and particularly, you know, growing our six feet in franchise that we're going to need. We're going to need some airplanes for that to occur. So combination of all. Okay.

Speaker Change: I think it's a combination of everything and in particular you know we're not at 2019 levels of capacity yet.

Speaker Change: We still project some demand growth into 2025.

Andrew Didora: Thank you. Your next question comes from the line of Andrew Didora with Bank of America. Your line is open. Hi, good morning, everyone. John, just on cost, you know, nice work on 2Q unit costs. They were certainly better than we were thinking, even with all your cruels. But, you know, think about the back half of the year. He puts in takes on the quarters. You know, just can you give us a sense of, you know, which quarter in the back half could have the highest potential year-over-year growth? And how to think about that? Well, I'd say for Q3, it'll be better than Q2, and Q4 will be better than Q1.

Unknown Attendee: We're just trying to understand the dynamics that you're seeing in that market. And then, as part of that, some of your competitors have also called out the fact that, you know, a number of travelers have decided to try to avoid France during the Olympics. But just wondering if that also creates an opportunity, you know, once that's over, for picking up some additional load, maybe in the September time.

Mark Galardo: Sure. Good morning, Chris.

Speaker Change: Hi, good morning everyone. John , just on costs, you know, nice work on 2Q unit costs. They were certainly better than we were thinking, even with all the accruals. But, you know, as we think about the back half of the year, any puts and takes on the quarters, just

Speaker Change: Can you give us a sense of which quarter in the back half could have the highest potential year-over-year growth and how to think about that?

Mark Galardo: So if we break down the Atlantic, there's kind of multiple components here. So firstly, leisure strength, you know, point-of-sale Canada, point-of-sale U.S. to, you know, the Mediterranean; Europe, in general, is pretty strong. We're looking at demand at five or six percent better year over year in terms of absolute demand, and we're seeing a lot of strength in the markets like, you know, Italy, Greece, Portugal, the south of France, etc., as we did last year.

Mark Galardo: What we saw in particular was core Europe, markets like France, Germany, where there's a significant point-of-sale Europe component, that was quite weak. One, the European economy is, you know, kind of stagnant right now. Second, to your point, the Olympics and a bit of the Euro soccer tournament all contributed to some of those declines, and as well, there was a lot of additional capacity on the North Atlantic, in general, So that being said, what we're seeing in September and October is definitely a rebound in France.

Mark Galardo: But you know, that's for September, October, November, December; it's a little bit too early right now to call. But in particular, you know, demand for the Mediterranean really, really held up, and we'll be looking to do a little bit more of that in 2025.

John Bert: So maybe they'll kind of give you a range. But that's our expectation is, I think we'll lend a year, you know, on a good note relative to where we started a year. You have a pretty tight range with the year-over-year cost growth.

Speaker Change: You have a pretty tight range with the year-over-year cost growth, so obviously Q3 is going to be our best quarter of the year.

John Bert: So obviously Q3 is going to be our best quarter of the year. Great, perfect.

Unknown Attendee: Okay, that's helpful. And then just one other question. You know, you're in the process right now, of course, of negotiations with your pilots. And I appreciate the sensitivities around this, but just trying to understand maybe any key milestones in the process that we should be thinking about timing around where you guys feel that an agreement can be reached. So any color you could add that would be helpful.

John Bert: And then I'm just curious, you know, when you kind of outside of the pilots, you know, where do you see the most pain points are most inflationary pressures still within your PNL? And, you know, how do you think about, you know, those pain points as you move into 2025. Thank you. Thanks. I'm not much else to say on it. Yeah, I think, you know, we talk about pilots, right? Just can you repeat the question? Oh, you said other than pilots. Outside of the pilots, where do you see the most inflationary pressures? And I think about going to 25.

Mike Rousseau: Sure, Chris, it's Mike. Yeah, we've actually posted all the up-to-date information on our website. And it's really right now that we're in the process of being overseen by a federal conciliator. And so we're in negotiations right now, and Again, this is under the review or under the guidance of a federal conciliator. We have reached agreement on several items. There's more to all see agree on, and we're hoping you can obviously do that over the next several weeks.

Unknown Attendee: Yeah, thanks. Good morning.

Operator: Your next question comes from the line of Cameron Doerksen with National Bank Financial. Your line is open.

Unknown Attendee: I just wonder, maybe you could go into a little more detail on what you're seeing from competitive capacity as we head into the fall here. I mean, you guys have basically said that you're going to, you know, take your capacity down a little bit here. Just wondering what you see from some of the competitors. Has there been an adjustment made there as well?

Speaker Change: We're talking about pilots though, right? Can you repeat the question? Oh, you said other than pilots. Outside of the pilots, where do you see the most inflationary pressures and how do you think about that going to 25?

Unknown Attendee: Okay. And, you know, the second question, just on your own capacity. I'm just trying to square a couple of things here. One is, you know, just in light of what appears to be, you know, maybe too much capacity out there in multiple markets. But at the same time, if I look at your fleet plan, you're adding some of these 737 MAXs, I mean, I see a couple of 767 passenger planes coming back in 2025.

John Bert: Yeah, okay. Well, thank you for that. Okay, because I didn't have much more to say on the pilot that put everything I know that in our guide. So that's great. On 25. I think, you know, on the one hand, I think, you know, we're going to continue to leverage any growth we get in capacity to continue to manage the cost structure. I think that we've talked about it, you know, earlier this year. I think airport costs are going to need to be pressure on the airline. And that'll be for multiple years to come. There are, you know, growth projects, and ultimately those benefit Air Canada, but at the same time, they're going to add to our cost structure.

Unknown Attendee: So I'm just trying to understand the rationale there. Is that more a backfill because you've got some of these supply chain-related engine issues? Or is that, you know, just your capacity that you think will be necessary as we look ahead to 2025? I think it's a combination of...

Unknown Attendee: I think it's a combination of everything, and in particular, we're not at 2019 levels of capacity yet. We still project some demand growth into 2025, and as well, we want to continue executing on some of our strategic pillars, in particular growing our Six Freedom franchise, and we're going to need some airplanes for that to occur, so a combination of all.

Operator: Your next question comes from the line of Andrew Didora with Bank of America. Your line is open.

Unknown Attendee: Hi, good morning, everyone. John, just on costs, you know, nice work on the QQ unit costs. They were certainly better than we were thinking, even with all the accruals. But you know, think about the back half of the year. He puts and takes on the quarters, you know, just can you give us a sense of which quarter in the back half could have the highest potential year over year growth and how to think about that?

John Bert: And I mentioned it a little bit earlier, but there was some push out of the legislation. I think that comes back, you know, as that firms up, maybe later in the year. That'll probably be year-over-year pressure with respect to cost, as we had anticipated this year that didn't fully materialize. So, you know, from that point on, I think, you know, we're going to continue to put our head down and work on cost discipline. And really work on continuing, continuing to pressure on the cost structure and leveraging growth as a way to do that. Great. And just to clarify on your, the answer to my, my first question, when you on the, the casm in the back half, that you were talking about absolute, not year over year growth, correct?

Speaker Change: So, you know, from that point on, I think, you know, we're going to continue to put our head down and work on cost discipline and really work on containing the pressure on the cost structure and leveraging growth as a way to do that.

John D. Burt: Well, um, I'd say, um... For Q3, it'll be better than Q2, and Q4 will be better than Q1. So maybe it'll kind of give you a range. But that's our expectation, is we'll end the year on a good note, relative to where we started the year. You have a pretty tight range with the year-over-year cost growth, so obviously, Q3 is going to be our best quarter of the year.

Speaker Change: Great, and just to clarify on the answer to my first question on the chasm in the back half, you were talking about absolutes, not year-over-year growth, correct? Correct.

John Bert: Correct. Okay, thank you. Yeah, the two and a half to three and a half percent of the year-over-year number, and the rest is really just to give you a sense for how the curve will play out. Great. Thank you, John.

Speaker Change: Yeah, the 2.5 to 3.5% is the over year number and the rest is really just to give you a sense for how the curve will play out.

Tom Fitzgerald: Thank you. Your next question comes from the line of Tom Fitzgerald with TD Cowan. Your line is open. Hi, everyone. Thanks very much for the time, and thanks for the warm welcome. If we could just, you know, we get a lot of questions about, you know, the Canadian consumer into 2025 with the mortgage reset. So would you just mind walking us through how you see travel demand evolving in Canada next year and just, you know, I appreciate some of the investor concerns on the interest rate sensitivity. But it also seems like there's a higher floor on demand, just given any immigration flows and then also possibly just from, you know, maybe older age demographics that are have a little bit stronger consumer balance sheets.

Unknown Attendee: Great, perfect. And then I'm just curious, when you kind of outside of the pilots, you know, where do you see the most pain points or the most inflationary pressures still within your P&L? And, you know, how do you think about those pain points as you move through moving to 2025? Thank you.

Speaker Change: Great. Thank you, John . Thank you.

Speaker Change: Your next question comes from the line of Tom Fitzgerald with TD Cowan. Your line is open.

Unknown Attendee: Thanks. Not much else to say on that. So I, yeah, I think, you know, we're talking about pilots, though, right? Just, can you repeat the question? Oh, you said other than pilots.

Tom Fitzgerald: maybe older age demographics that have a little bit stronger consumer balance sheets. So just love to see what you're seeing there and if you have maybe any indications on the, you know, any read-throughs from your AeroPlan data. Thanks.

Tom Fitzgerald: So just to let the see what you're seeing there. If you have maybe an indication on me, you know, any read through from your aeroplane aeroplane data. Thanks. Sure. Good morning, Tom. So in general, demand, we expect demand to be, you know, some Canada to be Canadian is pretty strong for Q4 for Q3. You know, we saw demand to and from Canada about plus five. And then we observe some of the, you know, the things that we follow. KPIs we follow to Q4 Q1 leisure demand sensitive. We obviously track, you know, the bookings that are kind of occasions to see, you know, what kind of son appetite and those metrics are up year over year.

Unknown Attendee: The Pilots, where do you see the most inflationary pressures and how do you think about that going into 2025? Yeah, okay. Well, thank you for that. Okay, because I didn't have much more to say about the pilots. I put everything I know in our guide.

John D. Burt: So that's great. On the one hand, I think we're going to continue to leverage any growth we get in capacity to continue to manage the cost structure. I think that we talked about it earlier this year. I think airport costs are going to continue to be pressured on the airline, and that'll be for multiple years to come. There are growth projects, and ultimately, those benefit Air Canada. But at the same time, they're going to add to our cost structure.

Speaker Change: Good morning Tom. In general, we expect demand from Canada to be pretty strong. For Q3, we saw demand to and from Canada about plus 5.

Tom Fitzgerald: And as we look into international demand Q4 Q1, we can see stable indicators. So no real slow down observed yet from the Canadian consumers. And again, we're diversified into as we're a customer stream. You know, we've got not just, we're not reliant on just a cane consumer. We have various points of sale; you know, us extreme premium customers, etc.

Tom Fitzgerald: So all of that, you know, leads us to believe that we're in a stable environment and that we should continue to see some growth, you know, from Canada to Canada for next year. Okay, thanks. That's, that's really helpful, and that all makes sense. And then just any like, you know, you guys have obviously had a lot of great progress with, with aeroplane membership signups.

Speaker Change: Various points of sale, you know, U.S. 6 freedom, premium customers, etc. So all that, you know, leads us to believe that we're in a stable environment and that we should continue to see some growth, you know, from Canada to Canada for next year.

Mark Nasr: Is there any, you know, I'm just starting to think about longer term of growth and growth in members and where you want that program to end up. Thanks again for the time. Hi, Thomas. Welcome aboard. It's Mike Russo.

John D. Burt: And I mentioned it a little bit earlier, but there was some pushback from the legislation. I think that comes back as that firms up maybe later in the year, that'll probably be year over year pressure with respect to cost, as we had anticipated this year that didn't fully materialize. So from that point on, I think we're going to continue to put our heads down and work on cost discipline and really work on containing the pressure on the cost structure and leveraging growth as a way to do that. Great, and just to clarify on the answer to my first question on the chasm in the back half, you were talking about absolutes, not year-over-year growth, correct? Correct. Okay. Thank you.

Mark Nasr: I'm going to pass that question to Mark Nazer, who has oversight on aeroplane, among other things. Sure. Good morning, Tom. Thanks for the question. So when we acquired the program, we were running it about four and a half million, just under active members. And we've more than doubled the size of the program since then. And that growth is now coming not just from Canada, but from a membership base where in the United States and in other geographies. And so we're building out a product portfolio and partnerships that allow us to have relevance, you know, increasingly in Canada, but also in other geographies just because of obviously the limits of the market size of air travelers here.

Speaker Change: Hi Tom. Welcome aboard. It's Mike Rousseau. I'm going to pass that question to Mark Nasr, who has oversight on aeroplanes, among other things.

Unknown Attendee: Yeah, the two and a half to three and a half percent of the year over year number and the rest is really just to give you a sense for how the curve will play out.

Operator: Your next question comes from the line of Tom Fitzgerald with TD Cowan. Your line is open.

Mark Nazar: Sure, good morning, Tom. Thanks for the question. So when we acquired the program, we were running at about four and a half million just under active members.

Mark Nazar: And we've more than doubled the size of the program since then.

Speaker Change: And that growth is now coming not just from Canada, but from a membership base where in the United States.

Speaker Change: and in other geographies. And so we're building out a product portfolio and partnerships that allow us to have relevance, you know, increasingly in Canada, but also in other geographies, just because of obviously the limits of the market size of air travelers here.

Unknown Attendee: Hi everyone. Thanks very much for the time. And thanks for the warm welcome.

Savanthi Prelis: Your next question comes from the line of Saudi Shammun with BMO. Your line is open. Okay, good morning. Thank you. The advance of the liability on the balance sheet, John, you know, we saw a flat quarter or a quarter. I think, you know, looking at the 10 year historical average, the typical Q2 to Q1 is up 10, 11%. I don't think there was a one single year where Q2 was flat versus Q1, except maybe 2020. I mean, which was down a little bit. So I'm just wondering, like, is this kind of just the context of normalization?

Unknown Attendee: If we could just, you know, we get a lot of questions about, you know, the Canadian consumer in 2025 with the mortgage reset. So would you just mind walking us through how you see travel demand evolving in Canada next year? And just, you know, I appreciate some of the investor concerns about the interest rate sensitivity, but it also seems like there's a higher floor on demand, just given the immigration flows and then also possibly just from older age demographics that have a little bit stronger consumer balance sheets. So just love to see what you're seeing there. And if you have maybe any indications on the, you know, any readthroughs from your aeroplane, aeroplane data. Thanks.

Speaker Change: Your next question comes from the line of Fadi Chamoun with BMO. Your line is open.

Unknown Attendee: Sure. Good morning, Tom.

Fadi Shamoun: Okay, good morning. Thank you.

Fadi Chamoun: I don't think there was one single year where Q2 was flat versus Q1, except maybe 2020, which was down a little bit. So I'm just wondering, like, is this kind of just the context of normalization we're seeing?

John Bert: We're seeing pretty much across the travel, the Madden, the post COVID here or how do you think about this liability as we go forward? In terms of, you know, it's contribution to cash flow or like that. I don't think that, you know, the ending is structurally different or fundamentally different. I just think that, yeah, I mean, we are a little bit of inflection here. So that may have had a little bit of pressure, but, you know, we still have a pretty strong first half of cash generation and working couples an important part of that. From a go forward point of view, continue to expect that as we, as we have some restoring of capacity and growth, particularly over the next couple of years, that that'll continue to track as a positive.

Mark Galardo: So in general, demand, we expect demand to be, you know, from Canada to be pretty strong. For Q4, for Q3, you know, we saw demand to and from Canada about plus five. And as we observe some of the, you know, the things that we follow, KPIs that we follow to Q4, Q1, leisure demand sentiment, we obviously track, you know, the bookings at our Canada vacation to see, you know, what kind of sun appetite and those metrics are up year over year.

Mark Galardo: And as we look into international demand, Q4, Q1, we continue to see stable indicators. So, there has been no real slowdown observed yet from the Canadian consumer. And again, we're diversified in terms of our customer stream, you know; we have not just, we're not reliant on just the Canadian consumer; we have various points of sale, you know, US 6 freedom, premium customers, etc. So all that, you know, leads us to believe that we're in a stable environment and that we should continue to see some growth, you know, from Canada to the US.

Speaker Change: I don't think that, you know, there's anything structurally different or fundamentally different. I just think that, yeah, I mean, we are a little bit of inflection here.

Speaker Change: So, that may have had a little bit of pressure, but we still have a pretty strong first half of cash generation and working capital is an important part of that.

Speaker Change: some restoring of capacity and growth particularly over the next couple of years that that'll continue to track as as a positive and you know we typically convert a quite high percentage of our of our EBITDA to cash from operations before CapEx.

John Bert: And, you know, we typically convert a quite high percentage of our EBITDA to cash from operations before CapEx. And, and we believe that that's going to continue to be an important part of our ability to generate cash flows. Okay.

Unknown Attendee: Okay, thanks. That's, um, that's really helpful. And that all makes sense. And then just any like, you guys have obviously had a lot of great progress with aeroplane membership signups. Is there any, do you have any, just how are you thinking about longer term with growth and growth and members and where you want that program to end up? Thanks again for the time.

Michael Rousseau: And my kind of second question is, you know, Michael expressed, you know, frustration with the stock. I think shareholders do as well, but, you know, there's some uncertainty obviously here this year and maybe a bit of a normalization reset in the post-COVID world here. But you don't track to maybe your third best profit EBITDA in last 20 years, and you've got strong balance sheet and solid liquidity, obviously. Why not take a more opportunistic approach and take some stock buyback potentially off stable to, to, to create kind of long term value on the equity side. Yeah, talk about a direct question.

Mike Rousseau: Hi, Tom. Welcome aboard. It's Mike Rousseau. I'm going to pass that question to Mark Nasr, who has oversight of aeroplanes, among other things.

Speaker Change: But you're on track to maybe your best profit EBITDA in the last 20 years and you've got a strong balance sheet and solid liquidity obviously

Speaker Change: to create kind of a long-term value on the equity side.

Mark Nasr: Sure. Good morning, Tom. Thanks for the question. So when do we

Mark Nasr: Good morning, Tom. Thanks for the question. So when we acquired the program, we were running at about four and a half million just under active members. And we've more than doubled the size of the program since then. And that growth is now coming not just from Canada but from its membership base in the United States and in other geographies. And so we're building out a product portfolio and partnerships that allow us to have relevance, you know, increasingly in Canada but also in other geographies, just because of, obviously, the limits of the market size of air travelers here.

Michael Rousseau: So, of course, Fadi, I think we've indicated that we're focused on creating shoulder value and capital allocation to shareholders, and returning and returning value to them is high on the party list. And we'll do that, you know, over in due course. I think we've managed here in steps, and we'll continue to make sure that we carry out our cap allocation strategy to do both grow and reward shareholders. So the answer is that that is on the radar on a high list of parties. Okay.

Speaker Change: and returning value to them is high on the priority list and we'll do that in due course. I think we've managed here in steps and we'll continue to make sure that we...

Sheila Kahyaoglu: Thank you. Your next question comes from the line of Sheila Teoglu of Jeffries. Your line is open.

Operator: Your next question comes from the line of Fadi Chamoun with BMO. Your line is open.

Speaker Change: Your next question comes from the line of Sheila Keoghlu of Jeffreys. Your line is open.

Sheila Kahyaoglu: Hey, good morning, guys, and thank you so much for the warm welcome. You gave a lot of great color in the script in terms of yields regionally. Maybe I wanted to ask about Pacific specifically as you redeploy seats into the region, and it remains undersupplied. How do we think about just, you know, how you manage problems as capacity is restored in the region and how we think about ASMR growth there. Sure, good morning, Sheila, and they're welcome to the call. So, on the Pacific, again, the comms are very tough. Last year, we had an abnormally high rasm, contributed by some other supply and some other issues, but in particular, we expected rasm declines this year. However, on aggregate, the yields that we're experiencing in the Pacific, the overall demand situation and supply situation continues to be very favorable, and we're very happy with the margins that we're driving overall in our Pacific roots.

Sheila Keoghlu: Hey, good morning, guys, and thank you so much for the warm welcome.

Sheila Keoghlu: You gave a lot of great color in the script in terms of yields regionally. Maybe I wanted to ask about Pacific specifically. As you redeploy seats into the region and it remains undersupplied, how do we think about just...

Unknown Attendee: Okay, good morning. Thank you.

Unknown Attendee: The advances, the liability on the balance sheet, John, you know, we saw a flat quarter over quarter. I think, you know, looking at the 10-year historical average. The typical Q2 to Q1 growth is up 10-11%. I don't think there was one single year where Q2 was flat versus Q1, except maybe 2020, which was down a little bit. So I'm just wondering, like, is this kind of just the context of normalization we're seeing? Pretty much across the travel demand in the post COVID here, or how do you think about this liability as we go forward? in terms of, you know, its contribution to cash flow or how they are

John D. Burt: I don't think that there's anything structurally different or fundamentally different. I just think that, yeah, I mean, we are at a little bit of an inflection here. So that may have had a little bit of pressure.

Sheila Kahyaoglu: And we mentioned in the script, two new roots that we launched this summer with three months, you know, lead time to sell, you know, all the exceedingly well, and we see that continuing into Q3, Q4. Too early to say what we've seen 2025, because some variables are outside of our control, like capacity to and from China, but I think you can expect the Pacific to continue to be relatively robust all the way to the end of the year. Got it.

John D. Burt: But, you know, we still have a pretty strong first half of cash generation, and working capital is an important part of that. And from a going forward point of view, I continue to expect that as we have some restoration of capacity and growth, particularly over the next couple of years, that will continue to track as positive. And, you know, we typically convert a quite high percentage of our EBITDA to cash from operations before CapEx, and we believe that that's going to continue to be an important part of our ability to generate cash flows.

Michael Rousseau: Maybe we'll follow up on that as you continue to add new routes and new capacity, and then maybe just on the transporter market, if we could talk about that a little bit, given the US main lines and they're seeing their domestic weakness, given oversupply of the lower cost carriers diluting their pricing in hubs, your transporter results were down 3% on a healthy 7% increase in capacity, so how do we think about any overcapacity headwind that you might see in the second half of this year in the transporter market? Good question. At the moment, we're not seeing, you know, the same weakness in the US domestic market is relatively shielded by it in the sense that we don't have, you know, ultra low-cost carriers operating between Canada, US, so the, you know, environment is still pretty healthy.

Sheila Keoghlu: and Hubs, your transporter results were down 3% on a healthy 7% increase in capacity. So how do we think about any overcapacity headwind that you might see in the second half of this year in the transporter market?

Michael Rousseau: The distinction I'd make on the Canada US sector is some of our investments are longer term in nature. You know, we're trying to build a sizable and scaled six freedom network. You know, in the short term, there might be some yield pressure, but in the long term, you know, it will deliver significant value to our international networks. That's a perspective that we're taking. And again, relatively happy with some of the early results that we're seeing on a lot of the ads that we put into the US market. Got it.

Kevin Chiang: Thank you. Your next question comes from the line of Kevin Chiang with CIBC. Your line is open.

Unknown Attendee: Okay, and my my kind of second question is You know, Michael expressed, you know, frustration with this talk, I think shareholders do as well. But, you know, there's some uncertainty, obviously, here this year, and maybe a bit of a normalization reset in the post COVID world here. But you're on track to maybe your third best profit EBITDA in the last 20 years, and you've got a strong balance sheet and, solid liquidity, obviously, and why not? take a more opportunistic approach and take some stock buyback potentially off the table due to to create a long-term value on the equity side. Yeah.

Kevin Chiang: Good morning. Thanks for taking my question. Maybe just on the comment around Q4 prasm stabilizing on a year-of-your basis. Is that primarily steps you're taking related to mix as you redeploy capacity in different markets relative to maybe expectations earlier this year, or is that also a function of maybe some of the things you're seeing? The competitive dynamic wasn't sure how to kind of think of, you know, what's driving that stabilization in prasm as we kind of exit 2024 here.

John D. Burt: Yeah, talk about a direct question. So, of course, Fadi, I think we've indicated that we're focused on creating shareholder value and capital allocation to shareholders, and returning value to them, is high on the priority list. And we'll do that in due course. I think we've managed this in steps, and we'll continue to make sure that we carry out our capital allocation strategy to both grow and reward shareholders. So, the answer is that that is on the radar on a high list of priorities.

Speaker Change: Hi, good morning. Thanks for taking my question. Maybe just on the comment around Q4, PRASM stabilizing on a year-over-year basis, is that primarily...

Speaker Change: Steps you're taking related to mix as you redeploy capacity in different markets relative to maybe expectations earlier this year or Or is that also a function of maybe some of the things you're seeing the competitive dynamic wasn't it wasn't sure how to kind of Think of you know, what's driving that that stabilization in prasm as we kind of exit 2024 here

Operator: Your next question comes from the line of Sheila Kahyaoglu of Jeffreys. Your line is open.

Kevin Chiang: Hi Kevin. Smart just on the Q4 the cost become a bit easier. We start to see last year and Q4 some of the yield normalization. So that's what makes the compares, you know, kind of interesting year of a year, whereas Q3 where still is kind of you for state. And before we start to notice some of the changing profiles. Now, we are, you know, making some changes to our capacity allocation, reducing capacity on the North Atlantic, moving it to India, you know, taking some measure approach on the Pacific. So that's also leading to some of the stabilization and the rasm.

Kevin Chiang: What are you seeing? Okay, that's helpful.

Unknown Attendee: Hey, good morning, guys. And thank you so much for the warm welcome.

John Bert: And maybe I'll ask. I know there's been a lot of questions on this call around costs. Maybe I'll ask it a different way. If I look at your non-fuel non-labor costs growth in the first half of this year and in Q2, it's essentially tracked your capacity growth, which would suggest you've seen more manageable unit cost inflation in those non-fuel non-labor costs. Just wondering, as you think through the rest of 24 and into 25, is that kind of the right way to think about those cost buckets and really fuel and labor, maybe APPR. Those are kind of the swing factors as we think about where Chasm goes from here.

Speaker Change: Okay, that's helpful. And maybe I'll ask, I know there's been a lot of questions on this call around around, you know, costs, maybe I'll ask it a different way. If I look at your non fuel non labor costs growth in the first half of this year, and in Q2, it's essentially tracked your capacity growth, which, which was suggest, you know, you've seen, you know, more manageable unit cost inflation in those non fuel non labor costs. Just wondering, you know, as you think,

John Bert: Yeah, I think so. I think that's a fair comment. Okay, perfect.

Jamie Baker: Thank you.

Jamie Baker: Your next question comes from a line of Jamie Baker with JP Morgan. Your line is open. Hey, good morning, everybody. Most of my questions have been answered, but I do have one. So, as you track the individual flight behavior of your frequent flyers, is there any evidence of any sort of, I don't know, like a pivot from premium back to non-premium? I mean, I guess another way to ask is, when you look at the growth in premium that you spoke to before, is it largely driven by existing passengers, or is there still a measurable phenomenon where non-premium passengers are trading up?

Unknown Attendee: You gave a lot of great color in the script in terms of yields regionally. Maybe I wanted to ask about the Pacific, specifically, as you redeploy seats into the region, and it remains undersupplied. How do we think about just You know, how you manage prisms as capacity is restored in the region, and how we think about AFM growth there.

Speaker Change: Your next question comes from the line of Jamie Baker with J.P. Morgan. Your line is open.

Mark Galardo: Sure, good morning Sheila, and welcome to the call. So on the Pacific, you know again the comps are very tough. Last year we had an abnormally high RASM, contributed by some other supply and some other issues, but in particular, you know we expected RASM declines this year, but on aggregate, the yields that we're experiencing in the Pacific, the overall demand situation, and the supply situation continue to be very favorable, and we're very happy with the margins that we're driving overall on our Pacific routes, as we mentioned in the script.

Jamie Baker: Hey, good morning, everybody. Most of my questions have been answered, but I do have one. So as you track the individual flight behavior of your frequent flyers, is there any evidence, you know, of any sort of

Jamie Baker: Any color on consumer behavior vis-à-vis premium would be helpful. Thanks.

Mark Galardo: Two new routes that we launched this summer with three months, you know, lead time to sell, you know, all did exceedingly well. And we see that continuing into Q3, Q4. It's too early to say what we see in 2025 because some variables are outside of our control, like capacity to and from China. But I think you can expect the Pacific to continue to be relatively robust all the way to the end of the year.

Michael Rousseau: On the premium side, a lot of the trends that you've been seeing over the last year are continuing into Q3 and Q4. We don't see at this time very much trading down, if you will. What we do see in an economy cabin is there's more pressure there from leisure prices of customers, but the premium demand and yield environment is still pretty stable and strong going into Q3 and beyond. So don't see that as an hour. Okay, helpful.

Mark Galardo: Got it. Um, maybe we'll follow up on that as you continue to add new routes and new capacity. And then maybe just on the transporter market, if we could talk about that a little bit, given the US main lines, and they're seeing their domestic weakness given oversupply of the lower cost carriers diluting their pricing and hubs, your transporter results were down 3% on a healthy 7% increase in capacity. So how do we think about any overcapacity headwind that you might see in the second half of this year in the transporter

Mark Galardo: Good question. At the moment, we're not seeing the same weakness in the US domestic market is relatively shielded by it in the sense that we don't have, you know, ultra-low cost carriers operating between Canada and the US. So the, you know, environment is still pretty healthy. The distinction I'd make between Canada and the US sector is that some of our investments are longer-term in nature. You know, we're trying to build a sizable and scaled six freedom network.

Mark Galardo: You know, in the short term, there might be some yield pressure, but in the long term, you know, it will deliver significant value to our international network. So that's a perspective that we're taking and, again, relatively happy with some of the early results we're seeing on a lot of the ads that we put into the US market.

David: Sure, Jamie. On the premium side, a lot of the trends that you've been seeing over the last year are continuing into Q3 and Q4. We don't see at this time very much trading down, if you will.

Operator: Your next question comes from the line of Kevin Chiang with CIBC. Your line is open.

Unknown Attendee: Hi, good morning. Thanks for taking my question. Maybe just on the comment around Q4, Prasim stabilizing on a year-over-year basis, is that primarily steps you're taking related to mix as you redeploy capacity in different markets relative to maybe expectations earlier this year, or is that also a function of maybe some of the things you're seeing in the competitive dynamic? I wasn't sure how to kind of think of what's driving that stabilization in Prasim as we kind of exit 2024 here.

Mark Galardo: Hi Kevin, this is Mark. Just on the Q4, the comps become a bit easier. We started to see last year in Q4 some yield normalization, so that's what makes the comparisons, you know, kind of interesting year over year, whereas in Q3, we're still in this kind of euphoric state. In Q4, we started to notice some of the changing profiles. Now, we are, you know, making some changes to our capacity allocation, reducing capacity on the North Atlantic, moving it to India, you know, taking some measures on the Pacific. So that's also leading to some of the stabilization in the RASM that you're seeing.

John D. Burt: Okay, that's helpful. And maybe I'll ask, I know there were a lot of questions on this call about, around, you know, costs. Maybe I'll ask it a different way. If I look at your non-fuel, non-labor cost growth in the first half of this year and in Q2, it's essentially tracked your capacity growth, which would suggest, you know, you've seen, you know, more manageable unit cost inflation in those non-fuel, non-labor costs.

John D. Burt: Just wondering, you know, as you think through 20, the rest of 24 and into 25, is that, is that kind of the right way to think about those cost buckets and really fuel and labor, maybe APPR? Those are kind of the swing factors as we think about, you know, where CASM goes from here.

Unknown Attendee: Yeah, I think so. I think, you know, that's, I think that's a fair comment. Okay, perfect. Thank you.

Operator: Your next question comes from the line of Jamie Baker with J.P. Morgan. Your line is open.

Unknown Attendee: Hey, good morning everybody. Most of my questions have been answered, but I do have one.

Unknown Attendee: So as you track the individual flight behavior of your frequent flyers, is there any evidence of any sort of, I don't know, like a pivot from premium back to non-premium? I mean, I guess another way to ask is when you look at the growth in premium that you spoke about earlier, is it largely driven by existing passengers, or is there still a measurable phenomenon where non-premium passengers are trading up? Any color on consumer behavior vis-a-vis premium would be helpful. Thanks.

Mark Galardo: Sure, Jamie. On the premium side, a lot of the trends that you've been seeing over the last year are continuing into Q3 and Q4. We don't see at this time very much, you know, trading down, if you will. What we do see in the economy cabin is there's more pressure there from leisure price-sensitive customers, but the premium demand and yield environment is still pretty stable and strong going into Q3 and beyond, so we don't see that as of now.

Unknown Attendee: Okay, very helpful. Thank you very much.

Unknown Executive: Thank you very much.

Valérie Durand: This concludes the question and answer session.

Valérie Durand: This concludes the question and answer session. I'll turn the call over to Valerie Durand for closing remarks.

Valérie Durand: I'll turn the call to Valerie Duran for closing remarks. Thank you very much for your attention and great questions today. Once again, should you have any further questions? Do not hesitate to contact us at Investor Relations. Thank you very much for your interest and the good questions that you have. Thank you very much.

David: This concludes the question and answer session. I'll turn the call to Valerie Durand for closing remarks.

Thank you very much for your attention and great questions today.

Unknown Executive: This concludes today's conference call. We thank you for joining.

Unknown Executive: You may now disconnect.