|18 February, 2020

Air Canada profit misses as costs rise amid 737 MAX grounding

Air Canada has focused on improving margins while meeting growing demand on key domestic and international routes

An Air Canada Boeing 767-300ER, with Tail Number C-GEOU, lands at San Francisco International Airport, San Francisco, California, April 16, 2015.

An Air Canada Boeing 767-300ER, with Tail Number C-GEOU, lands at San Francisco International Airport, San Francisco, California, April 16, 2015.

REUTERS/Louis Nastro

Air Canada missed analysts' estimates for quarterly profit on Tuesday, as the airline spent more on maintaining older aircraft in its fleet amid the grounding of Boeing Co's 737 MAX jet.

Canada's largest airline said it expects aircraft maintenance expenses to increase by about C$150 million ($113.2 million) this year from 2019.

Air Canada has focused on improving margins while meeting growing demand on key domestic and international routes, but faces capacity constraints due to the global grounding of the 737 MAX plane.

North American airlines have faced higher costs and canceled thousands of flights since the grounding following two crashes involving the model.

Air Canada, which is renewing its Airbus narrow-body fleet with MAX aircraft, had expected to expand its fleet of 24 MAX jets to 50 by mid-2020.

The company reported an adjusted net income of C$47 million, or 17 Canadian cents per share, for the fourth quarter ended Dec. 31, lower than the C$55 million, or 20 Canadian cents per share, a year earlier. 

Operating revenue rose 4.8% to C$4.43 billion.

Analysts on average had expected quarterly earnings of 38 Canadian cents per share and revenue of C$4.53 billion, according to IBES data from Refinitiv.

($1 = 1.3253 Canadian dollars)

(Reporting by Allison Lampert and Ankit Ajmera; Editing by Sriraj Kalluvila) ((Allison.Lampert@thomsonreuters.com; 514-796-4212; Reuters Messaging: allison.lampert.reuters.com@reuters.net))

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