AC Suspends 2019 Financial Guidance
 

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MONTREAL, March 15, 2019 /CNW Telbec/ - Air Canada announced today that, following Transport Canada's safety notice closing Canadian airspace to Boeing 737 MAX aircraft until further notice, the Federal Aviation Administration's temporary grounding order and Boeing's decision to suspend MAX deliveries to airline customers, it is suspending all financial guidance it provided in respect of the first quarter and full year 2019.

In light of the current uncertainty, Air Canada is suspending all financial guidance it provided on February 15, 2019 and February 28, 2019 in respect of the 2019 financial year. The financial guidance provided for the years 2020 and 2021 with respect to annual EBITDA margin (earnings before interest, taxes, depreciation, amortization and impairment, as a percentage of operating revenue) and annual ROIC (return on invested capital) as well as the cumulative free cash flow over the 2019-2021 period remains in place.

Air Canada continues to adapt a contingency plan to address the evolving situation and will provide updates as developments warrant.

So should we cry?

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Why? This is simply AC acknowledging the reality that the 7M8 grounding is likely going to have a meaningful effect but that the effect can't be quantified at this time. If this gets resolved quickly and the planes are back in the air in a few days, it probably doesn't matter much. But if goes for several months, it could be very costly.

The real driver here is the grounding. Any communication to the financial markets is going to be entirely dependent on that and lagging behind it.

Wonder what the impact is going to be on airfares. With something like 35 aircraft being pulled out of the skies that is a lot of capacity taken out of the short-medium haul market, which should translate into higher fares/fewer sales until things get sorted.

Isn't that "something like" 24 aircraft? At least if we are talking about AC.

Although they were expecting to have a total of 36 by summer. There are 4 aircraft that are already assembled. 2 on the flight line, 1 in pre flight prep and 1 in PDX getting painted.

I see. Thanks for the added info!

It's a guessing game for everyone .... but IIRC, the Ethiopian black boxes didn't even get to Paris until yesterday. The Indonesian analysis took several weeks .... and that was just to understand what the problem is. Meanwhile, the 787 grounding was three months. Will the 737 grounding be three months? Two? Four? Who knows ... but I'll be shocked if it's only three weeks.

The statement is required under security laws for a publicly-trade company when a material change occurs. Grounding of a portion of your fleet for an unknown period of time would certainly qualify.

I wasn't saying the grounding would only last three weeks (I think it will be more than a couple of months like what the FAA was saying yesterday). I was referring to the fact that AC only pulled three weeks' worth of inventory offline, so we can still all go ahead and book on MAX routes more than three weeks out. Next week, AC might pull one additional week's worth of inventory offline, and pull one more week offline the week after as the situation unfolds. So essentially AC could be moving that three week window as the situation unfolds, until such a time when they receive affirmative information on when the grounding order will be lifted.

Hence, booking flights more than three weeks out, I don't think we'll be gouged (and if our booked flights are affected, we can be protected anyway for no additional cost). Inside that three week window? Yeah, you're kinda screwed.

I was referring to the entire Canadian market, which includes the dozen or so aircraft that Westjet has - all of that is capacity coming out of the marketplace. (We can add in the four from Sunwing and get to around 40).

I understood you