Air Canada

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00:18 Thank you, Donna. [Foreign Language] Welcome and thank you for joining us on our first quarter call of 2022.

Joining us this morning are Michael Rousseau, our President and Chief Executive Officer; Amos Kazzaz, our Executive Vice President and Chief Financial Officer; Lucie Guillemette, our Executive Vice President and Chief Commercial Officer; and Craig Landry, our Executive Vice President and Chief Operations Officer. 00:49 On today’s call, Mike will begin with a brief overview of the quarter, Lucie will touch up on our revenue, our network performance, Aeroplan and Air Canada Cargo, Amos will provide additional details on our financial performance, fleets and liquidity and then we will turn it back to Mike.

We will then be available until 9:00 A.M. for questions from equity analysts.

And of course, we will remain available for additional questions after the call through our Investor Relations team. Immediately following the analysts' Q&A session, Mr.

Kazzaz and Pierre Houle, Vice President and Treasurer, will be available to answer questions from term loan B lenders and holders of Air Canada bond. 01:33 Before we get begin, please note that our comments and discussion on today’s call may contain forward-looking information about Air Canada's outlook, objectives, and strategies, which are based on assumptions and subject to risks and uncertainties.

Our actual results could differ materially from any stated expectations. I therefore refer you to our forward-looking statement caution in Air Canada's first quarter news release, which is available on aircanada.com or on SEDAR.

02:04 I will now turn it over to Mike.

02:06 Merci, Valerie. Good morning, everyone.

[Foreign Language] Thank you for joining us on our first quarter earnings call today. I'm pleased to report that we exceeded our internal expectations and key financial metrics, like, revenue, EBITDA and unrestricted liquidity, despite the numerous challenges in Q1.

It was an interesting quarter, starting slow due to Omicron and ending on a very positive note with the elimination of several travel restrictions, resulting in March bookings coming in over 90% of March 2019 levels, also a very positive leading indicator to a much stronger Q2 and Q3 results. 02:50 Challenges around inflation, higher fuel prices and the uncertainty arising from the conflict between Russia and Ukraine continue to impact the entire industry.

However, our incredibly strong and best-in-class management team is managing the risk profile very effectively. Lucie and Amos will speak to this in greater detail.

We are very positive on the rest of the year and continued growth over the next several years. 03:15 Throughout the pandemic, we focused on core strengths pivoted to take advantage of new opportunities, continue to invest in the future and performed at a very high level, despite some of the restrictive travel restrictions in the world.

For this, I must credit our employees and together with our entire leadership team, I thank them for their hard work over the last two years. As today's results and our improved operating performance show, our teams are now showing the same level of determination, commitment and passion in executing on our recovery strategy.

03:51 Customers continue to return because of the factors I mentioned earlier, traffic was down, but only marginally from a very busy fourth quarter of last year. We anticipated -- renewed demand for travel, and we have been restoring capacity.

We increased it by 2% in the previous quarter and almost 240% from the first quarter of 2021. This year's first quarter capacity represents about 55% of the first quarter of 2019.

04:19 Return of customers is translating into increased revenue, we reported operating revenue of nearly $2.6 billion in the quarter, while down from the previous quarter due to the impact of Omicron, was up significantly from a year ago when we had revenues of only $729 million. Our transformed Aeroplan program, Air Canada Cargo and Air Canada Vacations also contributed to revenues, showing the success of our strategy to expand and diversify revenue sources.

04:48 We also showed cost discipline in the quarter, including from the benefits of our renegotiated maintenance contract and other structural changes we have made. Our adjusted cost per available seat mile or adjusted CASM declined 6.6% from the fourth quarter of 2021.

And we ended the quarter with nearly $10.2 billion in liquidity almost unchanged from December 31, 2021. 05:14 Our cash position enacts in both a defensive and offensive fashion.

Defensively, it helps manage the risk of unexpected events, which we saw was extremely important over the past two years. As we exit the pandemic, more importantly and certainly more exciting, it also allows us to make strategic investments such as the recent announcement to acquire new Airbus 321XLRs and the two new additional Boeing 767 freighters.

To better position ourselves for the post-pandemic marketplace, while increasing fuel efficiency and our overall cost and margin capabilities. We held a very successful Investor Day about a month ago, where we outlined our strengths, our strategy and financial goals.

We are deeply committed to achieving our full potential. 06:02 And finally, before I turn the call over to Lucie, I would like to mention that we recently hit a milestone by flying more than 100,000 customers in a single day for the first time in more than two years.

I think our customers for their continued loyalty, either when flying with us or trusting us to ship their cargo. We are grateful and thank them for choosing Air Canada.

And we look forward to welcoming many more than back on board. Thank you.

Lucie?

06:31 Thank you, Mike and good morning, everyone. I'm pleased to share that this quarter, passenger revenues rose to over $1.9 billion and nearly five-fold increase compared to the first quarter of 2021.

The increase in passenger revenues applies to all cabin categories, especially premium economy, which experienced over 6 times the revenue in the first quarter of 2022, when compared to the same period in 2021. 07:00 At the system level, capacity increased nearly 240%, while traffic increased close to 418%, which translated into 22.8 percentage point increase in passenger load factor.

Passenger revenue per ASM in the first quarter of 2022 increased over 43%, when compared to the first quarter of 2021. While we can see positive trends, we're not yet at 2019 levels.

When compared to the first quarter of 2019, first quarter 2022 passenger revenues, operating capacity and traffic have experienced a decline of roughly 50%, 45% and 55% respectively. 07:41 We are however anticipating a turnaround as ticket -- passenger ticket sales in March ‘22 we’re close to March 2019 levels.

In fact, advance ticket sales as March ‘21, ‘22 of $3.5 billion exceeded by almost $200 million, the March 2019 levels. This is notable as it continues to show strong customer demand for Air Canada and a very encouraging sign that the recovery continues to gain momentum.

08:11 Our operating capacity over the quarter more than tripled from the first quarter of 2021, when significant travel restrictions were in place. This suite statement of capacity and traffic growth -- grown a turnaround in passenger revenues.

All markets are up for the first quarter of 2021, mostly notably the U.S. transborder, Atlantic and Pacific, primarily due to the easing of restrictions when compared to the operating conditions of the first quarter of 2021.

08:42 To provide little more detail, U.S. transborder passenger revenues of $425 million increased $396 million from the first quarter of ’21.

Atlantic passenger revenues of $464 million increased $377 million from the first quarter of ’21. And we saw passenger revenues on the Pacific of $98 million increased $82 million compared to the same quarter of ’21.

Keep in mind, however, that deployed capacity to the Pacific market remained significantly lower than that of other markets we serve and this is mainly due to significant travel restrictions in key Asian destinations, such as China. We are optimistic that by ‘23 ’24, the Asia-Pacific market will rebound as countries progressively open their borders to foreign travel.

09:35 The increase was also felt that Air Canada Vacations, where we saw higher volume in ground package sales which supported the $205 million increase in other revenues from Q1 2021. With the headwinds of the pandemic behind us, I'd like to spend more time on the forward view as we see a favorable and exciting developing trend in our network rebuild and overall booking posture.

Our continued turnaround will be bolstered by the expansion of our network this coming summer, as we are re-launching a new service on four transborder and five domestic routes and restoring 41 North American routes. We plan to operate to 51 Canadian and 46 U.S.

airports this summer, offering customers the largest network and the most travel options of any Canadian carrier. With this, we expect to return to 90% of our pre-pandemic North American capacity this summer.

10:32 As mentioned at Investor Day, we are in the business of global connectivity. We will feature over 1,000 connecting city pairs from the United States to our international network at summer.

This will only grow as we rebuilt Asia and launch additional new routes from each of our hubs. Our expanded network also includes 34 international routes, relaunching across Pacific and Atlantic with the latter expected to reach over 90% of 2019 ASM levels in the second half of this year.

11:02 We are pleased with the recovery on the Atlantic to summer, an important market for Air Canada. As we look ahead to our second quarter capacity, we plan to accelerate our recovery and slide roughly 73% of second quarter 2019 ASM capacity.

This summer, we will be at nearly 80% of 2019 and we're targeting to be close to full recovery during 2024. Our strategy of focusing on our hubs and growing their respective global connectivity focusing on Sixth Freedom transit traffic to and from the United States and focusing on leisure VFR travelers will pay dividends.

Our advanced bookings are accelerating and continue to meet our expectations. 11:44 While the recovery in business market continues to lag the leisure markets, we are seeing signs of an accelerating recovery with steady signs of improvement week-over-week.

We're also very encouraged by indicators of recovery for small and medium businesses and anticipate further rebound post Labor Day and into 2023. Until then, we will continue to focus on creating new products and seizing opportunities to mitigate the associated yield impact.

In short, our exposure is manageable, given the size of our premium cabins and the real opportunities we have to tap into other points of sales, while Corporate Canada returns. 12:23 While we await the return of corporate traffic, we're seeing more demand for our premium products from leisure customers.

In fact, our premium cabin revenue recovery outpace the economy cabin in the first quarter. We will continue to innovate with our service offering.

Our recent agreement with Porsche is a good example. Porsche Cars Canada will be the exclusive vehicle supplier of luxury hybrid and all-electric vehicles to the Air Canada chauffeur service at Toronto, offered to select signature class customers, connecting to Asia, Europe and South America.

12:56 We're also expanding the service for the first time to Vancouver and as well, our Signature Suite dinning lounge in Toronto reopen during the quarter, while Vancouver Williston follow. To support demand generation, we're investing more and retail advertising, led by our ready to Europe campaign in the first quarter.

And also, our holiday ad won a bronze at the 2022 CLIO awards, the world’s most recognizable international advertising awards according to Time Magazine. 13:26 We are actively ramping up operations and are confident we have the necessary resources to operate our commercial schedule.

In addition, there is -- we are actively working with our partners, the various agencies and airport authorities to make the necessary preparations. We have waited over two years for this and so have our customers, and we are prepared to welcome them back.

13:48 Now turning to two important strategic levers for our future Aeroplan and cargo. We're thrilled with Aeroplan's performance over the first quarter of 2022 and saw several KPIs performing at all-time highs.

Our transfer programs digital enhancements and everyday partners are proving attractive. In fact, we saw our highest ever new member acquisitions in the first quarter.

Air redemption bookings were also an all-time high, up 19% over the same quarter in 2019. 14:19 Program generated gross billing from points sold to third-party partners exceeding Q1 2019 levels by 21%.

It is also the first-time since the onset of the pandemic that card acquisition volumes exceed pre-pandemic levels for all three of our Canadian card issuers. And we hit another record this quarter with the moves points transfered into Aeroplan from other credit card programs showcasing the increasing strength of Aeroplan's U.S.

and international business. 14:51 The redesigned Aeroplan program continues to enjoy positive reviews from customers, industry experts and the media.

Last week Aeroplan won two Freddie Awards, including being recognized for offering the best points redemption ability in the Americas. Our revenue management and loyalty teams have optimize the program to deliver better value to members, while also driving a 30% increase in yield, on redemption tickets when compared to 2019.

15:18 As for cargo, a high demand for cargo, especially in the Pacific market combined with our new freighter flying has led to a strong performance in this area. In the first quarter of ’22, cargo revenues of $398 million increased $117 million or about 42% from the first quarter of ‘21.

Looking ahead, we expect this to soften as we reconvert aircraft back to passenger configurations and receive our new freighter aircraft. The cargo team is working diligently to prepare for the future freighter deliveries, scheduled over the remainder of the year.

Amos will speak to you about the changes in the fleet, but just before I turn it over to him, I will quickly go over a few other updates. 16:02 Air Canada Cargo has expanded its freighter network to Europe and Atlantic Canada beginning with the start of service to Halifax this month.

Service to Frankfurt, Cologne, Istanbul and Madrid is expected to begin in May. Thanks to addition of a second Boeing 767-300(ER) freighter.

To build our presence in additional space for cargo bookings, especially from freight forwarders, Air Canada’s Cargo capacity is now available on several platforms that allow real-time pricing and e-booking for customers, such as WebCargo, CargoAI and an expanded presence on Cargo One. This is part of a continued adaptation, digitization and investment by our Canada Cargo and its commercial strategy during the COVID 19 pandemic.

I also take this opportunity to thank our employees across our company, who are giving our recovery efforts there all, as we welcome our customers back and aim to rise higher together. 16:59 And with that, I will pass it on Amos.

17:01 Thank you, Lucie. [Foreign Language] Good morning, everyone.

First, let's take a quick look at the financial overview of the quarter. On a GAAP basis, we recorded operating revenues of $2.573 billion compared to the first quarter operating revenues of $729 million in 2021, an increase of $1.844 billion or about 3.5 times.

Compared to the first quarter of 2019, operating revenues decreased $1.861 billion or 42% due to the impact of the COVID 19 pandemic. EBITDA excluding special items of negative $143 million improved $620 million from the first quarter of 2021.

For 2022, we continue to expect an annual EBITDA margin of about 8% to 11%. 18:00 Operating expenses for the first quarter were $3.123 billion, the $1.345 billion increase from the first quarter of 2021 can largely be attributed to year-over-year growth in operating capacity as well as to the impact of the increase in jet fuel prices.

For 2022, we continue to expect our adjusted CASM to remain about 13% to 15% above 2019 levels. 18:29 I will now touch on the more notable year-over-year variances in operating expenses in the first quarter of 2022 compared to the first quarter of 2021.

Beginning with fuel, in the first quarter of ‘22, fuel expense of $750 million increased by $550 million from the first quarter of ‘21. This is following a 57% increase in jet fuel prices, as well as more jet fuel leaders used because of the higher volume of flying compared to the first quarter of ’21.

19:03 Since the beginning of April, we have seen a rapid increase in the price of jet fuel with record crack spreads as market forces have driven jet fuel in particular to record highs. We expect this to continue through another month or so, and then become more normalized albeit still high.

We believe that much of this increase can be recovered through fares of the revenue optimization tools, as well as through our continuing focus on cost reduction initiatives. 19:34 We now expect the price of jet fuel will average $1.24 per litre for the full year of 2022.

As a recovery continues, restrictions ease and customers fly again, we have been able to call back employees and welcome new colleagues. To illustrate on a full-time equivalent basis, Air Canada and its subsidiaries had over 27,000 active employees in the first quarter of ‘22 versus just a little over 16,000 employees in the first quarter of ’21.

This is the primary reason for the rise of $179 million or 34% from the first quarter of 2021 for wages, salaries and benefits. 20:21 Over the quarter, regional airlines expense excluding fuel and ownership costs also increased $121 million or 62% from the first quarter of ’21.

Again, the increase is primarily driven by higher expenses due to higher volume of flying compared to the first quarter of ‘21 and continues to be partially offset by savings from the consolidation of regional flying. Aircraft maintenance expense of $26 million decreased by $124 million or 83% from the first quarter of ‘21, in part thanks to an amended agreement between Air Canada and the third-party maintenance provider.

20:51 As a result, a favorable adjustment of $159 million was recorded in aircraft maintenance expense from the adjustment to maintenance accruals and the recognition of future credits that will be available under the amended agreement. This agreement not only provides a significant period cost savings, it right sizes future costs and gives us more flexibility on future maintenance events and fleet decisions.

21:31 Turning to our fleet. Early in the pandemic as a response to the surge in demand for air cargo space, we innovated by operating all cargo flights using passenger aircraft temporarily converted into an all-cargo configuration.

Six of those Boeing 777-300s and three Airbus A330s were returned to passenger service over the quarter with one more of each aircraft type to be converted back to passenger service by year-end. 22:01 On the other hand, we have acquired two new Boeing 767-300 ER freighters that will be added to the fleet this year.

These additional freighters are expected to enter service in 2023. We took delivery of three MAX 8s over the quarter and now have 34 in the fleet.

We purchased these three aircraft with cash. We also took delivery of one A220 bringing the total to 28 in the fleet, an additional six MAX 8s will be introduced as well as five A220s bringing those totals to 40 and 33 respectively by the end of this year.

22:41 We announced, we will be introducing 30 Airbus 321XLRs and we have selected IAE to supply Pratt & Whitney PW1100G-JM engines, spares and related maintenance services, 10 will be purchased and the other 20 will be leased with deliveries expected to begin in the first half of 2024 and concluding in 2027. So there are now four aircraft added since our 26 Airbus A321XLR order that was announced last month.

We also have purchase rights to acquire additional 15 of these 321XLRs between 2027 and 2030. 23:23 Turning to liquidity.

We began the quarter with about $10.4 billion of unrestricted liquidity, which included $950 million in undrawn revolvers. During the quarter, we generated $59 million in free cash flow, an improvement of $1.221 billion when compared to the same period last year, reflecting higher net cash flows from operations and strong advance ticket sales.

We ended the quarter with nearly $10.2 billion in unrestricted liquidity close to 2021 year-end levels. This is comprised of cash and cash equivalents, short and long-term investments of $9.212 billion and $950 million available under undrawn credit facilities.

24:11 Going forward, we estimate that we require a minimum unrestricted liquidity balance of $5 billion to support ongoing business operations. This also includes a larger buffer to manage cost risk and unplanned disruptions, minimum unrestricted liquidity and improved funds available under our credit facilities.

24:32 I will close by thanking our employees for their efforts and dedication. I will now turn the call back over to Mike.

24:39 Great and thank you, Amos. Traffics returning, revenues are growing, our networks being restored, and our finances including our liquidity position are very strong.

Furthermore, we are continuing to invest to build on our highly competitive position we already enjoy in the emerging post pandemic marketplace. To maintain the accelerated momentum, we have begun a new strategic focus to drive continuous improvement called Rise Higher is guiding our actions and as part of our strategic decision making as we move through the recovery and beyond.

25:14 Rise Higher bills on our corporate priorities aiming to increase revenue while controlling costs, expanding internationally, engaging employees and delivering superior customer service. Our announcement of the acquisition of 30 Airbus A321XLRs is a good example of rise higher in action, with all four pillars working in a coordinated fashion.

The fuel efficiency of these aircraft will reduce operating costs. As Lucie said, as long range opens new market opportunities internationally.

New aircraft has been welcomed by employees as a signal optimism about our future, while providing many additional benefits. 25:51 We know customers will love the new aircraft with the state-of-the-art amenities, as we have leveraged and conducted several focus groups.

This is important because we're putting particular emphasis on the third pillar Rise Higher elevating the customer experience. The customer journeys were all priorities converge.

This is especially relevant in the ever-more competitive world in which we operate, where customer service will be a key distinguishing selling point for airlines. We plan to remain a recognized market leader in this respect and elevate our game.

26:25 321XLR order will also enable us to reduce our carbon footprint. Customers along with investors, employees and other stakeholders are holding brands and corporations to greater account on sustainability issues.

Air Canada has been a leader in this critically important area and we'll continue to set the standard, because it is our responsibility to do so, and we want to set an example for other airlines to follow and join a collective effort. Air Canada is deeply committed to meeting its EFG goals.

For example, despite the pandemic, we carried on with environmental programs and even strengthen them by adopting last year goal of net zero emissions by 2015. 27:04 Through our leave less travel program, we are sourcing sustainable aviation fuel allowing us to reduce greenhouse gas emissions at the source.

And just last week to Earth Day, we dedicate sustainable aviation fuel to four commercial flights departing from San Francisco to our major hubs in Toronto, Vancouver, Calgary and Montreal. As part of this, we are also enhancing our disclosure in addition to our annual citizens of world CSR report, in 2022, we would -- we will be releasing our first TCFD report to increase reporting a climate related financial information.

27:41 And ESG is about more than just the environment. It also includes other contributions that corporations can and must make to the communities they serve.

For this reason, we are very proud last week to announce we will be donating 100 million Aeroplan points to help Ukrainians come to Canada. And just yesterday, we also carried a second cargo shipment of humanitarian supplies for Ukraine, with over 100 employee volunteers helping assembled the relief packages.

28:09 In closing, it is difficult to describe fully the excitement and optimism we are all feeling as we look to our path forward. We continue our recovery with arguably the most solid foundation in Air Canada's existence, may concrete by extraordinary efforts and talents for our employees who I deeply thank for their loyal dedication and trust.

Through our cost discipline ingrained in our DNA, investments in our fleet, our hubs, global network and loyalty partnerships, our revenue management and other technologies as well as our product and especially our winners one culture, we are poised to not only exceed but enhance our leadership position and all the key building blocks we have spoken about today. 28:54 And with that, I'll turn it back now to Valerie.

28:57 Thank you, Mike and thank you all for joining us today. [Foreign Language] We are now ready for questions.

In the interest of time, and in order to be fair to all, we kindly ask that you each limit yourself to two questions or one question and one follow-up. Should you have additional questions, we invite you to contact us at Investor Relations.

Over to you, Donna.

29:55 Good morning, everybody. Thanks for taking my question here.

Maybe this is for Amos, you talked about the increasing of fuel price assumption in some of the levers, we're pulling on and those pricing is first and foremost, but I guess, just wondering how you're thinking about fuel hedging, especially as you look out into the summer and expectations of a continued recovery in demand? And then secondly, just maybe flexibility around if you are purchasing strategy and we saw jet fuel prices reach record levels earlier this month in New York harbor.

Will you able to adjust your purchasing strategy to help maybe average down your exposure to that market?

30:37 Okay. Good morning, Kevin.

Thanks for those questions. And certainly, fuel has been something we've continue to watch very, very closely.

With respect to hedging, we aren't hedged and one of the problems in terms of hedging right now is the fuel price escalation is really driven a lot by the crack spreads. The crack spreads are just at the levels we haven't seen, historically, and I am not going to know how far back you can look to see actually you've ever seen those sorts of crack spreads and you can't really -- and you can't hedge crack spreads.

31:14 So in effect, there really isn't much we can do in terms of hedging the crack spread and then the underlying fuel price whether WTI or Brent hedging at this point with the volatility in the marketplace, it doesn't make sense. It's not really attractive for us to hedge.

That said, our major competitors aren't hedging either, so in an environment where -- for the most part, our competitors aren't hedged. The ability to pass on increases in fares and managed through optimization and cost discipline is really sort of what's key how we're trying to manage through this dislocation in the market pricing.

31:54 Then you brought up, your other part of the question on New York harbor exposure that is something, again we tried to take a couple of actions to mitigate that. First, we tried to move some additional fuel into Ontario from the prairies.

We are successful in doing some of that. We also then tankered as much as we could, so we were carrying additional fuel into various East Coast stations and into the Caribbean, again to help hedge and deal with the dislocation in New York Harbor pricing.

So we tried to be agile and address the issues as much as we could. 32:35 And with that, we are continue to keep a close eye on it.

New York harbors pricing has come down. It's got a little bit of ways to go, but we're in -- feeling fairly good position right now.

32:47 That's great color. Maybe just a follow-up here.

I noticed your backing out later cost in your adjusted CASM. How should I think about that a $11 million if you're pulling out in Q1.

Is that essentially the incremental cost you're carrying to run a dedicated Cargo business versus maybe the cargo business you had prior to the pandemic, which utilized just the belly capacity, I guess the cost seem a lot lower than I would have imagined with you started off a dedicated freighter operation?

33:21 Yeah. It is right now -- it is specifically sort of as we're looking at the dedicated freighter.

So it's a small amount right now, and as additional freighters come on, then we'll see that -- you'll see that number grow a bit.

33:36 Okay. That's helpful.

Thank you very much.

33:47 Yeah. Thanks very much.

Good morning. Just a question on rising interest rates.

I know I guess there's a couple of different potential impacts for Air Canada. So maybe a question for Amos, what is, I guess an acceleration of interest rate to hikes here mean I guess for your cash pension payment expectations?

And also for your interest expense, I mean I think for the most part, your debt is mostly fixed. But I think you do have some variable rate exposure there.

So maybe you can just talk about the impact of rising interest rates.

34:17 Yeah. Good morning, Cameron.

So on interest rates, sort of the impact, if you take a look at pensions, right now, we have a surplus I think as reported about $4.7 billion pension surplus. And interest rates in that environment in certain extent certainly help that surplus, if you will.

So no real impact that we see on pensions. And if you look then at the rest of our debt profile right now, our fixed to floating is about 73% fixed and 27% floating.

So, in a rising rate interest rate environment, we are really fairly well protected. So that's the color I can offer on that.

35:04 Do you have any I guess, interest rate swaps on the variable portion or is that basically kind of unhedged?

35:11 Unhedged, and if you want to look sort of at a sensitivity on if it was another 1% increase in interest rates on the floating like -- floating portion of our debt that's equivalent about $45 million per year annually.

35:30 Okay. Perfect.

And just a quick question just operationally, I mean, I see that Pearson Airport is undergoing a runway rehabilitation. I think on one of the busier runways there, any concerns I guess around the impact on your operations from that this summer?

35:49 It's Amos again, Cameron. So, no impact on the operations.

We've been working very closely with the GTAA for Pearson folks and NAV Canada with respect to still being able to maintain operational capability on that runway and capacity, so do not see an impact at all.

36:12 Okay. Very good.

Thanks very much.

36:22 Thanks very much. Good morning, everyone.

I guess my first question is on business travel trends. I know in your Investor Day, you had indicated Lucie mentioned 75% to 80% of 2019 levels by 2023, and then kind of back to normal by 2024.

Just following up on that, that's a key area of focus, you mentioned that it's recovering, but is there any -- is there any way for us to track that? Where are you right now as a percentage of 2019, so that we can see how far you are from that and track the ramp up as we go through the years 2023 and ‘24?

In other words, what percentage of total business -- total travel, would you say of business travel, are we at versus 2019 today?

37:12 Hi. It's Lucie.

So first I would say, right now, we sit at approximately minus 50% of where we would have been out in 2019. And of course, for us domestic and transborder are the two largest services where we have corporate business.

And the reason why, in my comments earlier I did show some large signs of optimism here is two-fold. If I look at May and June, so if I project a little bit further, we're already seeing ourselves passing the threshold a fee minus 40% or so.

And secondly, when we look at indicators of small and medium business travel, so basically customers would be flying short durations, when there is one single passenger on a PNR, for example, even if we don't have contractual agreement with some of these SMEs, we are seeing that traffic is coming back. 38:21 So I think for North America, we're going to see steady progress and I think by the time we reach September and October.

We could be in the minus 30%, minus 20% range within North America. International might take a little bit longer.

The good thing for us is from an international point of view, because we've also solidified our U.S. schedule or transporter schedule.

It also gives us the opportunity to go and capture some of this corporate demand in the United States, which of course has recovered faster than the demand in Canada. But I would say, of all segments where, we're very excited to see the return it would be in this area because we're definitely seeing signs of a recovery.

39:06 Okay. That's very encouraging.

Thank you, Lucie. My follow-up question here is on fuel and rising fuel prices, but maintaining your EBITDA guidance suggestive that you're able to pass that on through higher and higher ticket or fair prices.

Do you think there is a limit to that and do you have any indication or any sense of what the -- because I guess on one hand you've got some pent-up demand that's making the traveler almost price agnostic. But I guess the concern is, how long does that last, when the pent-up demand is satisfied if fuel prices remain high.

Do you think travelers are going to be willing to pay higher ticket prices after the pent-up demand is satisfied?

39:57 Just a couple of comments on that. There is no doubt that as we work to mitigate the incremental cost of fuel here.

Fair, it is one thing. And obviously, we continue to, if you don't do all possible to recover, either through base fare or fuel surcharges are even revisiting some of our ancillary revenues, but where the opportunity lies as well for us, it's to really do our very best to manage the yields here.

So there is no doubt that may be for some segments of the market and that the demand may be more challenged with fares, but there is still opportunities for us to be able to bring in more money here at using other levers than just the basic fare increase. There is no doubt that for the very, very price sensitive markets and also given the competitive environment in Canada, we need to manage that -- we need to manage that wisely here, but we do, we do have means to be able to better mix, et cetera., to bring incremental revenue in the door to compensate for the escalating cost of fuel.

41:14 Okay. That's very helpful.

Thank you very much, Lucie.

41:24 Thanks, operator and good morning, everyone. So maybe my first question is on advance ticket sale liability.

I think you guys pointed out, it's above March 2019 levels looks like it's 5% above. I'm just wondering if the booking curve suggests that passenger revenue could exceed pre-pandemic levels this summer?

Or are you seeing bookings more so driven by 2023 demand?

41:51 And I would like to think that it could exceed 2019 levels, but we're planning to have capacity in the range of minus 20% approximately for this summer. So to reach 2019 levels this summer would not be achievable as a result of that, but perhaps by the time we look at early Q1 maybe Q1 or early Q2 of next year we could reach that, but we wouldn't reach 2019 levels this summer.

42:27 Okay. Thanks.

And a quick follow-up on Walter's question from demand elasticity. Just wanted to understand, historically speaking, obviously, we are in very, very different and unprecedented times here, but historically speaking, at what point have you seen the demand that elasticity come into play where you have seen fuel pricing, fuel prices go up steadily or not coming down quite materially and that has impacted demand.

So just trying to put some context behind where we can see the elasticity come in at this time?

43:07 Good morning. It's Mike.

Let me try and take that one, because it's a very difficult question. And because typically fuel prices are very volatile and periods of instability.

We obviously, as you know, have had relatively stable fuel prices up until Ukraine crisis. The last time was volatile during the financial crisis of 2008, 2009.

And so that whole debate about demand elasticity is very, very difficult to provide color on, because we've had a fairly stable environment between those in the last 10 years. Lucie’s group is excellent at putting in place all the levers that you spoke about in the last question and ensuring that we meet our demand objectives and that's a constant retooling and revamping of our practices.

And so it's Carnegie. -- I'm not trying to avoid the question, it's just as -- it's very difficult to have the answer a question, where really fuel prices only been volatile in a very unstable environment which impacts demand in so many other ways frankly.

44:19 And I would say, that the point was made earlier, we are in a period of pent-up demand right now and we are very, very cognizant of that and that's why we're being very prudent on capacity management as we grow back into 2019 levels.

44:28 That makes sense, Mike. Thanks and hopefully the fuel comes down in the next month or so.

I tell you can avoid this question.

44:52 Hi, Mr. Rousseau and Air Canada as a whole, very impressive quarter.

As Air Canada may be aware there is still a barrier with certain individuals that are unable to board on an Air Canada flight and fly domestic or international flights as per the vaccination status. As COVID restrictions ease even more, does Air Canada expect even higher ticket sales to positively trend higher, as there is currently approximately 6 million Canadians thereabouts unable to board an Air Canada flight as per the vaccination policy?

Does Air Canada expect that Canadian government to drop these mandates? Can you provide any insights?

And where if when, how will that impact ticket sales going forward? Thank you, Mr.

Rousseau and appreciate your time.

45:39 Okay. Thank you for the question.

One, we don't think those two events are connected regarding higher ticket prices and potentially on vaccinated passengers flying. As to your question, second part of the question, as to the Government of Canada is considering this right now and they are reviewing the situation like most countries are around the world as to mass mandate and vaccine requirements and -- but again the Government will review that in due course and make a decision.

And we will be asked our opinion at some point in time and we'll provide that. But again, this is what many countries around the world are doing right now.

46:25 Thank you for that. Just a quick follow-up question as well.

At what point in time, in terms of pricing power will you flip the switch in terms of the increasing ticket prices. Obviously, your Canada revenues had tripled and I'm just curious as to when you will potentially do that?

46:50 Well, as we spoke about before in some of the earlier questions, pricing is a dynamic situation based on competitive pressures and so pricing does change all the time somewhat due to cost inputs as we spoke about regarding oil prices, but really, it's a function of the competitive environment that we're in and the rise in revenue is primarily the result of increased traffic. Thank you.

47:23 Thank you so much.

47:30 Hey. Good morning.

Just Lucie, if I might just follow up on the color you provided on business recovery. Is that volumes or revenue I was just kind of curious what you're seeing on the yields front because in the U.S., at least that the refine leasing going to business yields up year up versus 2019?

47:54 Great. The numbers that I provided earlier that was traffic, but on the yield side in Canada as well, we are seeing positive yield versus 2019 for returning corporate travel.

Maybe not to the same extent is obviously because the demand levels are much higher in the U.S., but definitely our corporate travel is also positive yield year-over-year, versus 2019.

48:22 No. That's helpful.

And then Amos, I might follow-up on the maintenance, the new agreement and the savings there just 159 just seems like an adjustment. So how should we think about kind of the benefit going forward from that and is that different than what you had can anticipated as you thought about 2022 CASM, and beyond?

48:44 Good morning, Savi. Thanks for the question.

It's really for the most part, it helps, it is clearly sort of driven in terms of, took us longer to reach the agreement with a third-party provider. So we had been accruing maintenance expenses going forward based on previous contract rates and then through the negotiations.

We then essentially were able to now recognize the benefits of the new agreements, which then will benefit us obviously in this quarter and then going forward in ongoing maintenance events. 49:21 Relative to maintenance CapEx, no real change in that.

So what we had assumed before, I don’t remember quite off the top of my head what we had provided, there is really -- there is no material change in that.

49:36 So on the unit costs as you walked us through how that unit -- your expectations for unit costs in ‘22 and beyond, is that still pretty consistent than even with this savings?

49:48 Yes, that is pretty consistent. We had an idea that was happening, but, so it is consistent with what we had seen or when we had [Multiple Speakers].

49:57 Thank you.

50:05 Good morning, everybody and thanks for taking my question. I was intrigued by your ESG comments and plans for increased disclosure.

When I think about your hiring pilots, mechanics, flight attendants, and even managerial positions. Are there any kind of long-term guide post we should think about with respect to the carriers' efforts to onboard women and minorities.

50:38 Well, we're going to -- we're going to pass this question, great question. Thank you for the question.

We're going to pass this question to Arielle who is our Executive VP of HR, who is leading the charge on the issue, you spoke about.

50:55 Hello. Good morning.

It's a really good question because it's something that we keep an eye on all the time. The fact that the world is of changing a little bit in hiring, maybe a little bit more difficult doesn't mean that we're going to put this in any way on the back burner.

So we will always continue to have an eye on diversity, as we hire and that shrink be at every level of the company. We are very proudly diverse already.

We're very proudly bilingual, which is part of our diversity efforts and that will continue. So we don't see any of the challenges or the fact that it may be a little bit higher to attract talent as a reason to take a backseat.

51:37 Okay. That's super helpful.

Really appreciate the color. And I'll let someone else have a question.

Thank you.

51:52 Hi. Good morning, everyone.

Mike, I guess, clearly here in the U.S., the airlines are having some operational problems due to kind of labor and pilot availability, beginning to see a few issues over in Europe as well. Can you maybe speak to what you're seeing within Canada on the labor front and are there any limitations that you see to your ability to keep restoring your network at your plan pace because of any kind of major disruptions that will be helpful.

Thanks.

52:30 Great question, Andrew, and good morning. Good to hear from you.

Short answer is, we're not seeing any barriers for us to be able to get back to where we were in 2019 from a capacity perspective. Pilots are not an issue for Air Canada, given our number of wide bodies that we have in the fleet in a very attractive employer to come to.

And as you probably remember, we kept all our pilots on payroll through the pandemic and kept them trained and so that allowed us to cover a quicker as a business has come back. There is no doubt, there are some areas Canadian labor market is tight and so there are some positions under the wing potentially that are a little bit more difficult to recruit for right now.

But again, our operations team led by Craig Landry is spending a lot of time staffing up for the summer time and we're not seeing any issues in attracting and retaining, and training the staff that we need to run the summer.

53:42 Got it. That's helpful.

And then last one from me. So you were able to eke out a little bit of the free cash flow in 1Q within -- really tough environment.

So outside of maybe some lumpiness in CapEx going forward, is there any reason to think you cannot generate more consistent positive free cash flow on a quarterly basis from here, given what you see in the recovery? Thanks.

54:10 Hi, Andrew. Good morning.

It's Amos. As we look at free cash flow, we had our – in Investor Day, we gave you sort of our view in terms of our long-term cash flow generation here on a looking more specifically guidance in the quarters.

We are really prepared to do that at this point in time giving a little volatility and of course, we have a lot of CapEx investments. One of the things as you know that we're doing to begin our deleveraging efforts is basically not take on additional debt.

So as we spoke about the MAXs we're paying cash for them. We're looking at really spending our cash on investments in aircraft rather than financing them.

So, don't want to try to get ahead here and give you sort of a quarterly perspective as we really look at as we consider it really, over the long term, right now. So as soon as we have anymore guidance to give on a quarterly basis, we will introduce that but for now, not ready to.

55:10 Great. Thanks, everyone.

55:18 Yeah. Thanks, folks.

Good morning. Just thinking about Air Canada Vacations and passenger revenues, certainly a good step up in Q1 maybe not all the way back, but just thinking about how ACV is going to evolve maybe in the Q2, Q3.

I guess two piece in that, one as we're probably rotating more -- to more leisure traffic, are we going to see additional package. I was trying to understand maybe the advanced ticket bookings?

Is there more, is it fair to think that there's more packages in that advanced ticket number, then there would be normally in most years?

55:56 Hi. It's Lucie.

Maybe I'll answer that one. There is no doubt that even when we look at Air Canada Vacations, so advanced bookings for packages for end of Q3, Q4, well ahead of 2019.

And on the ACV front, we have two opportunities, one is obviously with the -- margin with respect to the sale of land packages, which of course we do extremely well on the Sun, all the Sun destinations. And for the summer, where we do have an opportunity for, I might say summer, all the way through to end of October, we have an opportunity for Air Canada Vacations as well to sell on to the Air Canada Transatlantic network as well, so the Air Canada Vacations is ready to be able to grow their performance on some of these transatlantic routes.

But there's no doubt when you look at the Sun, no concerns there at all. Volumes are solid, margins are solid, things are quite good there.

57:07 Okay. That's helpful.

And then just maybe turning to Cargo for a second, just looking at 30% year-over-year number on yield. Ask yourselves and I guess a number of airlines start bringing back capacity.

How should we think about that trending at least what you're seeing kind of near to medium term in terms of -- into the rest of the year and into next year?

57:26 Chris, it's Mike. Another good question.

It's hard to see where that's going to go, but you would think as belly capacity comes back in. Those yields will go back to ‘19 levels over some period of time that might be a year or two years.

It really depends on how quickly the belly capacity comes back into the marketplace, but our expectation or kind of our long-range plan is for yields to come back into ‘19 levels. The wildcard to some degree is Asia and how fast that comes back and what kind of disruptions they have.

As you know, Asia is a fairly strong cargo market and we've taken full advantage of that, with obviously full shutdowns of Shanghai and potentially Beijing, it's going to affect some short-term performance on cargo.

58:19 Okay. That's helpful.

Thanks, folks.

58:31 Thank you very much. Good morning, everyone.

I just want to get in one question if I could hear the Aeroplan, the redemptions and the billings in the quarter was quite intriguing to me. I mean it's quite an impressive result you called out the strength relative to 2019.

I'm just wondering, if you could characterize a little bit, how much of that you think or maybe you've got date on this was related to changes or the relatively new program, how much of it was related to its levers that you can pull and how much of it was just overall sort of behavior related to the recovery?

59:13 Hi. It's Lucie.

Maybe I'll try to answer that one for you. It's a little bit of, it's a little bit of each factor that you mentioned.

So, first of all, from a program point of view, the fact that we now have a much, much better means for customer to access redemption. So when we say customers can access all seats on all aircraft gives us flexibility in terms of how we build the back end to determine how many miles the customers will actually pay.

That of course is look at it from, it's almost as if we bought RM into the Aeroplan redemption discipline. That's one thing that's working very well for us.

60:02 Number two, we're also seeing a mix in terms of the traffic that we're carrying. I would say two from a redemption point of view in the past, premium redemptions internationally might have been a little bit stifled.

It was a fixed rate, fixed grade and because we have limited premium J Class capacity, we were not able to satisfy customer demand, simply because the economics were not there. With this new model, it allows us to be able to produce more volumes in the premium cabin, which we are seeing and that's also been very, very positive.

60:37 And of course, from a behavior point of view and we're very proud of the fact that the program is being recognized by our customers because they appreciate the changes we brought to the program. So from a behavioral point of view, there is no doubt that we've made redemptions more accessible and certainly coming out of the pandemic that that's also been helpful.

But when you say, these levers that we can control. Absolutely, they are, and I'll say to you, I think we've only begun to scratch the surface here.

There's a lot of opportunity for us with redemption started up.

61:20 Great. That's very helpful, Lucie.

Thank you.

61:25 Thanks, Tim.

61:31 Hey. Good morning, everybody.

I'll keep it quick. Just on this question of demand elasticity that came up a few times during Q&A.

Could you just comment on the longer-term relationship between Air Canada revenue or if you prefer Canadian industry revenue to Canadian GDP. It's a popular reconciliation everyone uses here in the States and it does speak to that elasticity question.

62:03 Hi, James. It's Mike.

There have been in the past relationships of GDP to industry revenue and I'm probably remember what they were like 1.2 to 1. [Multiple Speakers].

So I think it's, I forget what the U.S. is, but I thought it was fairly comparable to the U.S.

environment as well.

62:28 And where do you estimate it to be right now, which really is my point because you are here in the U.S., we're so far below with the economy can bear that I think a lot of questions on elasticity are highly misplaced. So I'm just kind of wondering your perspective on that.

62:44 We haven't looked at it as to where we are now. But as I said earlier, James, I mean we know we're in a pent-up demand environment and we're very, very -- that's why we're managing the capacity where we are.

We'll take -- I’ll see full advantage of the opportunity in front of us as we always have, but we're also very cognizant that we will have to be very agile if things change over the next little while.

63:06 Perfect. We're not particularly worried in that regard.

Thank you everybody. Take care.

63:19 Thank you, Donna. Thank you again for joining us on our Q1 2022 call today.

If you have further questions, please do not hesitate to contact us at the Investor Relations. [Foreign Language] Thank you and have a nice day.