Air Canada reported a 47 per cent decline in quarterly profit, stung by softening demand in key markets including France, which some travellers are avoiding this summer due to the Olympic Games.

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Canada’s largest airline reported revenue of $5.5 billion for the second quarter, a 2 per cent rise from the same period in 2023. The company has increased flights this year, so passenger revenue per available seat mile was down more than 4 per cent.

Transatlantic routes were the weak spot, with passenger revenue down 6 per cent for the quarter.

While demand for flights to southern European countries like Italy, Greece and Portugal has been strong, ticket sales for France and Germany haven’t been as good, chief executive Michael Rousseau said during a conference call with analysts. Germany was the host country of Europe’s football championship in June and July.

A sluggish European economy is also a factor, Rousseau said.

Passenger revenue rose for Canadian, United State and Pacific flights. The airline has shifted some planes to the latter region, adding new routes to South Korea and Japan, where executives expect even more growth.

Overall, the airline earned 98 cents per share on an adjusted basis, down from $1.85 a year ago. The number came as little surprise to analysts because Air Canada released preliminary results on July 22 that warned of lower profitability.

The company also lowered its full-year financial guidance last month, saying it was suffering from pricing pressures in international markets but still continues to see healthy demand. Airlines across North America have dealt with excess capacity this summer, which has caused them to offer discounted fares to attract cost-conscious consumers to fill those seats.

While Air Canada’s margin was lower than major U.S. airlines, it was ahead of some large European players, and the Canadian carrier maintains a strong balance sheet, Raymond James analyst Savanthi Syth wrote in a note to clients.

Rousseau told analysts that competitive pressures “continue to intensify, with new entrants and lower-cost business models.”

Overall, Air Canada has trimmed its flight capacity: it sees available seat miles rising as much as 6.5 per cent this year. Prior to the July profit warning, it had said capacity would increase as much as 8 per cent.

Air Canada shares have declined about 20 per cent so far this year, and were down 1.3 per cent as of 11:46 a.m. in Toronto.

Bloomberg.com