Brenda O’Farrell
Investing.com – Shares of Air Canada (TSX:AC) were climbing back in afternoon trading Tuesday after dropping more than 4.5% in the wake of the country’s largest airline reporting quarter earnings that fell short of expectations and issuing statements that its operations in the current quarter will be negatively affected by the spread of the coronavirus that has limited international travel and the ongoing grounding of Beoing 737 MAX jets.
Air Canada said its expenses to maintain aircrafts in the wake of the MAX groundings will add about $150 million to its costs in the current quarter. The airline – like most North American passenger carriers – has struggled to meet demand with its available fleet due to the worldwide grounding of the Boeing 737 MAX airliners. Air Canada had planned to just about double the size of its MAX aircraft fleet to 50 from 24 in 2020.
In addition, the airline was forced to cancel all flights to China since the end of January due to the deadly coronavirus that has put millions of Chinese in quarantine.
Air Canada’s routes between its three biggest hubs – Montreal, Toronto and Vancouver – and Beijing and Shanghai account for about 6% of its revenue-generating carrying capacity. At the moment, all traffic on those routes have been suspended through through the month of March.
These situations are expected to put downward pressure on Air Canada’s bottom line in the current quarter, the first of fiscal 2020. Company officials have said adjusted earnings for the period could be down about $200 million compared with the same period in fiscal 2019.
Company officials expect the routes to reopen to normal traffic with regular ridership levels by the third quarter of 2020.
Air Canada reported a $152-million fourth-quarter profit on total revenues of $4.43 billion, up from the $360-million loss it reported on the $4.23 billion in revenue in the last quarter of 2018.
Shares of Air Canada have increased 39.43% in the last year.