- Annual EBITDA margin of 19 to 22 percent
- Annual ROIC of 16 to 20 percent
- Cumulative free cash flow of $4.0 billion to $4.5 billion
- Leverage ratio of no more than 1.2 by the end of 2019
MONTRÉAL, Feb. 28, 2019 /CNW Telbec/ - Air Canada is updating its key financial targets in
conjunction with its 2019 Investor Day to be held today in Toronto from 09:00 to 12:30 ET.
From 2019 until 2021, Air Canada is targeting an annual EBITDA(1) margin (earnings before interest, taxes,
depreciation, amortization and impairment, as a percentage of operating revenue) of 19-to-22 percent and an annual return on
invested capital (ROIC)(1) of 16-to-20 percent. Air Canada is also projecting cumulative free cash
flow(1) of $4.0-to-$4.5 billion over the same period,
including projected free cash flow of between $400 million and $600
million in 2019, and a leverage ratio(1) of no more than 1.2 (measured by net debt over EBITDA) by the end of
2019.
"Since Air Canada held its first Investor Day in 2013, we have repeatedly met or exceeded virtually all of our key financial
targets, demonstrating management's ability to consistently deliver on our commitments and successfully execute on our business
plans. Moreover, we keep setting ambitious targets for Air Canada to drive continuous improvement and further increase
shareholder value. Our share price has appreciated over 1,300 percent over the last five years and over 4,000 percent since
April 1, 2009 when we embarked on our transformation strategy to position Air Canada for long-term,
sustainable profitability. In addition, we are now on course for our objective of achieving an investment grade credit
rating," said Calin Rovinescu, President and Chief Executive of Air Canada.
At Air Canada's 2019 Investor Day, Mr. Rovinescu will provide an update on the airline's strategy and Michael Rousseau, Deputy Chief Executive Officer and Chief Financial Officer, will discuss the updated
financial targets. In addition, select members of the Air Canada executive team will detail recent and upcoming
initiatives, as follows:
- Arielle Meloul-Wechsler, Senior Vice President, People, Culture and Communications, will
discuss Air Canada's competitive culture.
- Craig Landry, Executive Vice President, Operations, will detail the airline's operational
priorities and cost transformation initiatives identified in the operations.
- Lucie Guillemette, Executive Vice President and Chief Commercial Officer, will explore Air
Canada's revenue-generating initiatives and how the airline will continue to win in the marketplace.
- Mark Galardo, Vice President, Network Planning, will discuss the evolution of the network
and fleet and outline the growth opportunities ahead.
- Catherine Dyer, Senior Vice President and Chief Information Officer, will provide insight
into the benefits of the new reservation platform and other technology investments.
- Mark Nasr, Vice President, Loyalty and eCommerce, will discuss Air Canada's loyalty and
digital strategy and related analytics opportunities.
All financial target information provided is based on the accounting standards applicable to Air Canada as at January 1, 2019, including the impact of IFRS 16 Leases. In addition, the financial targets include the
impact of Aeroplan since its acquisition date of January 10, 2019. The cumulative free cash
flow target excludes the net proceeds on the closing of the Aeroplan transaction.
The outlook provided in this news release constitutes forward-looking statements within the meaning of applicable securities
laws, is based on a number of assumptions, including those discussed below, and is subject to a number of risks and
uncertainties. Please see the section below entitled "Caution Regarding Forward-Looking Information".
Attendance at Air Canada's 2019 Investor Day is by invitation only. A link to the live audio webcast of the event and
accompanying presentation slides will be available on Air Canada's website at aircanada.com prior to the
event.
Major Assumptions
Assumptions were made by Air Canada in preparing and making forward-looking statements.
As part of its assumptions, during the 2019-to-2021 period, Air Canada assumes relatively modest Canadian GDP growth.
Air Canada also assumes that the Canadian dollar will trade, on average, at C$1.32 per U.S. dollar
in 2019, C$1.29 per U.S. dollar in 2020 and C$1.28 per U.S. dollar in
2021 and that the price of jet fuel will average 82 CAD cents per litre in 2019, 84 CAD cents per litre in 2020 and 85 CAD cents per litre in 2021.
The following table summarizes Air Canada's major annual assumptions:
Major Annual Assumptions
|
2019
|
2020
|
2021
|
GDP Canada
|
Relatively Modest Growth
|
Canadian dollar per U.S. dollar
|
1.32
|
1.29
|
1.28
|
Jet fuel price – CAD cents per litre
|
82
|
84
|
85
|
(1) Non-GAAP Measures
Below is a description of certain non-GAAP measures used by Air Canada in an effort to provide readers with additional
information on its financial and operating performance. Such measures are not recognized measures for financial statement
presentation under GAAP, do not have standardized meanings, may not be comparable to similar measures presented by other entities
and should not be considered a substitute for or superior to GAAP results. Readers are advised to refer to Air Canada's
Management's Discussion and Analysis reports for the relevant periods for reconciliation of non-GAAP measures to
comparable Canadian GAAP measures.
- Adjusted pre-tax income (loss) is used by Air Canada to assess the overall pre-tax financial performance of its business
without the effects of foreign exchange gains or losses, net financing income (expense) relating to employee benefits, gains or
losses on financial instruments recorded at fair value, gains or losses on sale and leaseback of assets, gains or losses on
debt settlements and modifications, gains or losses on disposal of assets, Aeroplan intangible asset amortization, and special
items as these items may distort the analysis of certain business trends and render comparative analysis to other airlines less
meaningful. Air Canada uses adjusted pre-tax income (loss) before interest expense to
determine return on invested capital.
- Adjusted net income (loss) is used by Air Canada to assess the performance of its business without the after-tax effects of
foreign exchange, net financing income (expense) relating to employee benefits, gains or losses on financial instruments
recorded at fair value, gain or losses on sale and leaseback of assets, gains or losses on debt settlements and modifications,
gains or losses on disposal of assets, Aeroplan intangible asset amortization, and special items as these items may distort the
analysis of certain business trends and render comparative analysis to other airlines less meaningful.
- EBITDA (earnings before interest, taxes, depreciation, amortization and impairment) is commonly used in the airline
industry and is used by Air Canada as a means to view operating results before interest, taxes, depreciation, amortization and
impairment as these costs can vary significantly among airlines due to differences in the way airlines finance their aircraft
and other assets. EBITDA excludes special items as such items would distort the analysis of certain business trends and render
comparative analysis to other airlines less meaningful.
- Adjusted CASM is used by Air Canada to assess the operating and cost performance of its ongoing airline business without
the effects of aircraft fuel expense, the cost of ground packages at Air Canada Vacations, the operating costs of Aeroplan, and
special items as these items may distort the analysis of certain business trends and render comparative analysis to other
airlines less meaningful. Aircraft fuel expense is excluded from operating expense results as it fluctuates widely depending on
many factors, including international market conditions, geopolitical events, jet fuel refining costs and Canada/U.S. currency exchange rates. Air Canada also incurs expenses
related to ground packages at Air Canada Vacations which some airlines, without comparable tour operator businesses, may not
incur. In addition, these costs do not generate ASMs and therefore excluding these costs from operating expense results
provides for a more meaningful comparison across periods when such costs may vary. Air Canada
began consolidating Aeroplan's results on the January 10, 2019 acquisition date. Given that the
Aeroplan loyalty business was not consolidated in Air Canada's financial results in 2018, for comparative purposes, Air
Canada's adjusted CASM guidance for 2019 excludes any impact of Aeroplan.
- Leverage ratio refers to the ratio of net debt to trailing 12-month EBITDA and is commonly used in the airline industry and
is used by Air Canada as a means to measure financial leverage. Leverage ratio is calculated by dividing net debt by trailing
12-month EBITDA (excluding special items). As mentioned above, Air Canada excludes special items from EBITDA results (which are
used to determine leverage ratio) as these items may distort the analysis of certain business trends and render comparative
analysis to other airlines less meaningful.
- Free cash flow is commonly used in the airline industry and is used by Air Canada as an indicator of the financial strength
and performance of its business, indicating the amount of cash Air Canada is able to generate from operations and after capital
expenditures. Free cash flow is calculated as net cash flows from operating activities minus additions to property, equipment
and intangible assets, and is net of proceeds from sale-leaseback transactions.
- Air Canada uses return on invested capital ("ROIC") as a means to assess the efficiency
with which it allocates its capital to generate returns, ROIC is calculated by dividing adjusted pre-tax income before interest
by invested capital. ROIC is based on adjusted pre-tax income (loss), excluding interest expense. Invested capital includes
average year-over-year long-term debt, average year-over-year lease obligations and average year-over-year shareholders'
equity, net of excess cash not required to run its core business operations. Air Canada
calculates invested capital based on a book value-based method of calculating ROIC, as described above. Refer to the definition
of adjusted pre-tax income (loss) for a discussion as to why Air Canada uses adjusted pre-tax income (loss) to assess the
overall pre-tax financial performance of its business.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This news release includes forward-looking statements within the meaning of applicable securities laws. Forward-looking
statements relate to analyses and other information that are based on forecasts of future results and estimates of amounts not
yet determinable. These statements may involve, but are not limited to, comments relating to preliminary results, guidance,
strategies, expectations, planned operations or future actions. Forward-looking statements are identified using terms and
phrases such as "preliminary", "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict",
"project", "will", "would", and similar terms and phrases, including references to assumptions.
Forward-looking statements, by their nature, are based on assumptions, including those described herein and are subject to
important risks and uncertainties. Forward-looking statements cannot be relied upon due to, amongst other things, changing
external events and general uncertainties of the business. Actual results may differ materially from results indicated in
forward-looking statements due to a number of factors, including without limitation, our ability to successfully achieve or
sustain positive net profitability or to realize our initiatives and objectives, industry, market, credit, economic and
geopolitical conditions, energy prices, currency exchange, competition, our dependence on technology, cybersecurity risks, our
ability to successfully implement appropriate strategic initiatives or reduce operating costs, our ability to successfully
integrate and operate the Aeroplan loyalty business following its acquisition from Aimia Inc. and to successfully launch our new
loyalty program, our ability to preserve and grow our brand, airport user and related fees, high levels of fixed costs, our
dependence on key suppliers including regional carriers, employee and labour relations and costs, our dependence on Star Alliance and joint ventures, interruptions of service, environmental factors (including weather systems
and other natural phenomena and factors arising from man-made sources), our ability to pay our indebtedness and maintain
liquidity, pension issues, limitations due to restrictive covenants, pending and future litigation and actions by third parties,
our ability to attract and retain required personnel, war, terrorist acts, casualty losses, changes in laws, regulatory
developments or proceedings, epidemic diseases, insurance issues and costs, as well as the factors identified in Air Canada's
public disclosure file available at www.sedar.com and, in particular, those
identified in section 18 "Risk Factors" of Air Canada's 2018 MD&A dated February 15,
2019. The forward-looking statements contained or incorporated by reference in this news release represent Air Canada's
expectations as of the date of this news release (or as of the date they are otherwise stated to be made) and are subject to
change after such date. However, Air Canada disclaims any intention or obligation to update or revise any forward-looking
statements whether because of new information, future events or otherwise, except as required under applicable securities
regulations.
SOURCE Air Canada
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