Air Canada announced a reduced second-quarter profit on Wednesday, attributing the decline to excessive capacity in some markets and fierce competition on international routes, which compromised its pricing power.
North American airlines are grappling with the challenge of maintaining their pricing power, as the surge to capitalize on the booming summer travel demand has resulted in overcapacity, compelling them to offer discounts to fill seats. Last month, the carrier revised its full-year core profit forecast downward, citing a less favorable yield environment and international market competition.
Airlines are also encountering increased costs related to labor and aircraft maintenance. Air Canada has not yet finalized a new contract with the union representing its pilots, which could impose additional cost pressures on Canada's largest airline. The carrier's profit dropped to C$410 million ($298.23 million) or C$1.04 per share, down from C$838 million, or C$2.34 per share, in the same period last year. The Canadian carrier's operating revenue increased by two percent to C$5.52 billion for the quarter ending June 30.
