Click the link below to read the analyst call transcript.
https://seekingalpha.com/article/4671051-air-canada-acdvf-q4-2023-earnings-call-transcript
Highlighting the key point below
1. There will be investor's day this year, probably after pilots negotiations is over. Will clearly explain the strategy for 2025-26
2. 2024 will be a solid cash flow year.
(Using the formula CFO suggested, AC will be able to produce >$2.0B FCF. This will bring net debt close to precovid levels) and leverage ratio ~0.7, lowest ever. 3. Beyond 2024, airline has the capacity to produce cash flow consistently.
4. Also note in transcripts and MD&A, 2024 that there will be pre-delivery payments made in 2024
While not included in our full guidance, with the information we have available, we are confident that we will be able to continue to generate solid free cash flow in 2024, albeit at lower levels than 2023 as we take delivery of new aircraft and fund pre-delivery payments on our preorder book. *************************************************************************
Walter Spracklin
Okay. No, I understood. I completely understand that kind of sensitivity, for sure. Perhaps moving to free cash flow, you did mention that you’re not – you don’t have a guide out there any longer. And I think you said that 2024 would be strong but less than 2023. Is that half of ‘23? Is that – I’d love any color there. But – and then if you look out over the time frame of the next few years, kind of the way you did it in the past few years on a cumulative basis, you do have a fairly significant CapEx program. Is there – should we expect a meaningfully lower free cash flow trend over the next year versus last 3 given the CapEx? Is that the right way to look at it?
John Di Bert
Okay. Those are two good questions, and maybe some of that is going to be a better discussion for kind of a more wholesome investor discussion as we look through the year and find the right plan to think and talk long-term with the investor group. But what I would say is that, just on your first comment and then maybe I’ll add some color to the second. In symptoms, the EBITDA has been a good proxy for cash from operations for us. So we do have – against that, you would think about interest costs. And so we tracked a pretty good conversion is, I guess, my point. And if you look at the disclosure, we do provide a pretty good number for projected CapEx. I think in this last quarter, it’s around $2.7 billion for the year.
So you can do a little bit of your own math there, right, if you do a little bit of a haircut on EBITDA or like interest cash. And we don’t pay taxes really at this point in time. Our losses from prior periods are still being absorbed so that it absorbs our tax. And that gives you a pretty good place to land for a cash number. And that will move around a little bit with working capital and advanced ticket sales, those kind of things. But I don’t expect another $2.8 billion free cash flow year in 2024, that’s for sure. But I think it’s going to be solid cash generation.
And then from that point on, I think that the airline has the capacity to continue to generate cash flows on a consistent basis. Like I said, we will talk ‘25-‘26 and further out-years perhaps in a more wholesome discussion. But I would say that we have the opportunity to do different things with the aircraft that are coming into the fleet over the next 3, 4 years. That will allow us to have the right balance of cash generated as well.
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