Good morning, ladies and gentlemen, and welcome to the Air Canada Q3 2022 earnings conference call. I would now like to turn the meeting over to Ms. Valérie Durand. Please go ahead, Ms. Durand.
Thank you, Maude. Hello. Bonjour et bienvenue à la troisième revue trimestrielle de 2022. Welcome, and thank you for joining us on our Q3 call of 2022. Sorry, it's early. Thank you. Joining us for this call are Mike Rousseau, our President and Chief Executive Officer, Amos Kazzaz, our Executive Vice President and Chief Financial Officer, and Lucie Guillemette, our Executive Vice President and Chief Commercial Officer. Also with us this morning are Craig Landry, Executive Vice President and Chief Operations Officer, and Marc Barbeau, Executive Vice President and Chief Legal Officer. After management's review, we will be available until 10:00 A.M. Eastern Time, excuse me, for questions from equity analysts.
After the question and answer session, Mr. Kazaz and Pierre Rolland, Vice President and Treasurer, will be available to answer questions from Term Loan B lenders and holders of Air Canada bonds. Before we begin, please note that our comments and discussion on today's call may contain forward-looking information about Air Canada's business, objectives and strategies, which are based on assumptions and subject to risks and uncertainties. Our actual results could differ materially from any stated expectations. Please refer to our Q3 public disclosure for cautionary statements regarding forward-looking information. I will now turn it over to Mike.
Merci, Valérie, and good morning, everyone. Bonjour à tous. Thank you for joining us on the call today. We are very pleased with our Q3 financial results. They mark an important step in our recovery as we reported quarterly operating income of CAD 644 million, with a strong operating margin of 12.1%. This is our first positive quarterly operating income since the pandemic began in early 2020. EBITDA increased by more than CAD 1.1 billion. We saw very significant revenue growth with quarterly revenue of CAD 5.3 billion, about 2.5x from the CAD 2.1 billion a year ago on a capacity growth of 130%. In fact, that's around 96% of our Q3 2019 revenue levels, even with some restrictions still present, notably in Asia.
Meanwhile, we held a firm line on costs and managed through a challenging fuel environment. With the growth in operating capacity resulting in better aircraft utilization, Adjusted CASM improved by 38% when compared to the Q3 of last year. We reported positive net cash flow from operations for the fifth quarter in a row, and we ended the quarter with just over CAD 10.2 billion in total liquidity. Of course, these results are linked to the return of travel, which remains on a progressive recovery as we predicted it would be. This quarter, we safely transported 11.5 million customers. To give that some perspective, that is more than double the same quarter of last year and close to 90% of all customers carried in 2021.
Over the quarter, we continued to restore our extensive network, improve operational performance progressively, deploy our modern and efficient fleet, and enhanced our products and services. This, propelled by the incredible teamwork of our employees, is what is behind these financial results. COVID has been one of the industry's greatest challenges in both severity and duration. Yet throughout the pandemic and now still, and despite the personal challenges that they had to face, our employees have stayed focused on our customers and on positioning our company for recovery. I am incredibly proud of them, and on behalf of the entire leadership team, thank everyone for their hard work. Now, we are well into our winter operation preparations. With customers booking holiday and winter getaway travel, they can have full confidence in our ability to carry them safely and conveniently.
We continue to staff up, train, and are applying lessons learned during the summer to elevate our customer service. This includes working with our third-party service providers upon who we rely. As well, many technology initiatives we implemented over the last two years will remain in place because they improve the customer experience. Our recent online customer self-booking tool is one good example. Our key operational metrics, including flight completion and baggage handling, are now back to pre-pandemic levels. Air Canada is emerging from the pandemic stronger, more resilient and more adaptable. We are certainly well positioned to capitalize on the ongoing recovery. With that, I'll turn the call over to Lucie.
Thank you, Mike. Bonjour. Good morning, everyone. Mike spoke to our very encouraging return to operating profit. I'll expand on that topic by first discussing our passenger revenues surpassing CAD 4.8 billion, a nearly threefold increase from the Q3 of 2021. After some of the most trying times in aviation's history, we now see that travel is back with a strong momentum. In the Q3 of 2022, traffic and total operating capacity more than doubled year-over-year. This resulted in a 15 percentage point increase in passenger load factor. I'd like to emphasize that while we operated 79% of 2019's Q3 capacity, we recovered to 94% of the passenger revenues compared to the same period. This revenue performance resulted from a healthy yield environment, from a better fare mix in all cabins, and solid premium cabin performance.
The diversification of our network also contributed to this as it enabled us to offset some of the remaining post-pandemic challenges, such as ongoing travel restrictions in Asia and overflight limitations impacting our India operations. Our network diversification not only makes us less dependent on any one geography sector to drive overall revenue performance, it also gives us options to better balance our seasonality. With further easing of travel restrictions and recovery well on its way, our transatlantic markets performed exceptionally well. Atlantic passenger revenues were just shy of CAD 1.8 billion, an increase of nearly CAD 1.4 billion, or about 4.6x the Q3 of 2021. I'm extremely pleased to highlight that Q3 2022 Atlantic passenger revenues surpassed those of the Q3 of 2019 by 10%, even though we operated 91% of 2019's Q3 capacity.
All of our Atlantic routes met or exceeded our expectations, which gives us a lot of confidence, hence our decision to expand our summer 2023 offering with the addition of new European services to Brussels from Toronto, as well as Copenhagen and Toulouse from Montreal. The latter is prized not only for leisure, but also by corporate customers as it is strategically linked to global aerospace centers. We also competed well at home. Despite a very aggressive domestic Canada landscape, domestic passenger revenues performed above expectations and amounted to about CAD 1.5 billion, a 90% increase from the Q3 of 2021. By comparison, these revenues represent 95% of those in the same period in 2019 on 85% of the operated capacity. Revenue and yields each increased 12% when compared to the same quarter in 2019.
With the increasing demand and more routes and frequencies available, transborder passenger revenues of CAD 915 million increased CAD 624 million, or 215% from the Q3 of 2021. When compared to 2019, transborder passenger revenues were 92% of those in the same period in 2019 on 89% of the 2019 operated capacity. Our Sixth Freedom demand throughout the quarter remained robust. Over the last two quarters, we've seen solid improvements compared to our internal targets, as well as meaningful improvements versus 2019. In fact, we've hit a record in this traffic via our hubs over the quarter. As we look ahead, we're observing steady growth for U.S. originating traffic to the Atlantic and the Pacific.
With U.S. traffic continuing to trend upwards and given the strength of the U.S. currency, we expect our transborder network to continue performing well, generating strong revenues from points of sale to USA. Our recently expanded joint venture with our longtime partner, United Airlines, will also enable us both to expand our network reach and better serve our customers. We are very, very pleased with this partnership. Turning to the Pacific, revenues increased to CAD 382 million from CAD 112 million in the same quarter a year ago, reflecting a better operating environment after the easing of some restrictions, albeit that was limited to certain countries. Looking forward, we expect an improvement in this market as restrictions ease, like those recently announced for Japan and Hong Kong. Our passenger revenues also produced better results of CAD 285 million.
That is an increase of about 3.6x from the same period in 2021. This reflects the increased demand in all cabins and greater availability of routes and frequencies across our Caribbean, Central, and South America networks. Finally, other revenues of CAD 223 million in the Q3 of 2022 are more than double the Q3 of 2021 due to the higher volume of revenues at Air Canada Vacations. You know, we have invested over the years in a suite of tools that allows us to better predict demand and optimize our revenue potential. Despite the devastating past two years, we have continued to forge ahead with our revenue acceleration roadmap, and these tools allow us to quickly react and face the changing demand and booking profiles of the new normal with confidence.
As we head into prime sun flying, looking to Q4 and even Q1 2023, we continue to see very strong leisure and sun demand exceeding 2019 levels. You will recall that in the first six months of 2021, flights to Mexico and the Caribbean were suspended and travel restrictions were still ever present the following winter, so many customers are eager to return to travel. Since our last review with you, we've observed changes in booking behavior for both leisure and corporate travel. Booking curve is becoming a bit longer than post-pandemic. Trips are lengthening, and we can see travel patterns changing to accommodate a combination of business and leisure travel. In terms of corporate demand, the slow return to the office was once thought to keep people from traveling.
We now see that even the hybrid worker is returning to travel to re-engage in person with colleagues, customers, and suppliers. You will recall that we saw an important return of this type of travel in June. Post Labor Day, we've also seen positive improvements from those June levels, and we expect premium economy, business class revenues, and trips for business to continue to grow. In fact, the revenue recovery of premium cabins has outpaced economy cabins, which speaks to our ability to successfully develop new market segments. Advanced ticket sales were also strong in the Q3 , reaching 95% of 2019 levels for the same period. For the Q4 of 2022, we plan to increase our capacity to approximately 85% of the same quarter in 2019.
In addition to our new strategic routes to Europe and the U.S., the recently announced resumption of services to Japan and increased frequencies to key international destinations for summer 2023 will also stimulate additional future bookings. Another change we've taken note of is the rise of premium leisure travel. In the Q3 of 2022, passenger revenues for premium economy cabin increased 4x . Business and economy cabins revenues increased 3x each when compared to the Q3 of 2021. Passenger revenues for premium cabins combined increased about 11% versus the Q3 of 2019. We're pleased with the performance of our premium cabins, and we are diligently working to restore our offering with new adapted offerings to our new reality. Aeroplan is also performing extremely well. It remains a key component of our customer acquisition, retention, and marketing strategies.
Several Aeroplan KPIs set records in the quarter. We enrolled over 950,000 new members this quarter, and members continue to engage with our retail partners at levels beyond initial expectations. Those billings from points sold to third parties also came in at an all-time high, up nearly 30% over 2019, reflecting success with new card acquisition and spending levels on the existing base. Air Canada Cargo continues to play an important role. You will see that revenues declined by 23% from the Q3 of 2021, yet this remains above 59% above 2019 levels. This reduction was anticipated as it was mainly due to lower traffic in the Pacific market and reduced cargo activities as we have returned all the temporary converted aircraft to passenger service.
In addition, you'll recall that cargo yields were extraordinarily high at the beginning of the pandemic with the rapid surge in demand for air cargo paired with the reduced capacity resulting from the grounding of wide-body aircraft worldwide. Our growing 757 freighter fleet and investment in long-range 777 wide-body freighters, combined with the belly space from our robust passenger network, will allow us to continue to offer one of the most flexible and optimal cargo operations in the Americas.
We also continue to actively explore future opportunities as we see the possibilities to capture more market share. In addition to the freighters, we continue to fund our cargo future by investing in new technologies and solutions. Air Canada Cargo has also become the first North American carrier to join the CargoWise platform, allowing customers to have real-time access to schedule, pricing, and bookings. With that, I will now pass it on to Amos for his updates.
Merci, Lucie. Bonjour. Good morning, everyone. First, I'll provide a quick overview of certain financial elements worth calling out for this quarter. In the Q3 , we had operating expenses of CAD 4.7 billion, an increase of CAD 2.2 billion from the Q3 of 2021. It goes without saying that return of travel increased our year-over-year flying and consequently impacted all line items. Aircraft fuel expense was CAD 1.6 billion in the Q3 , an increase of CAD 1.1 billion. That is nearly 3.5x higher than Q3 of 2021. In fact, the cost of fuel per liter has increased by over 80% from the Q3 of 2021. Another element we must consider, to a lesser extent, is an unfavorable foreign exchange variance, which also contributed to the fuel expense increase. Continue to monitor fuel price volatility.
We have been primarily addressing the fuel price increase through pricing actions and through our revenue management levers. Overall, our Adjusted CASM of CAD 0.116 improved by 38% in the Q3 compared to the same period in 2021. It is also sequential decrease from the CAD 0.131 in the Q2 of 2022. When compared to the Q3 of 2019, Adjusted CASM increased 14.8%. Looking at non-operating expenses, the weakening of the Canadian dollar also impacted long-term debt and lease obligations. This is the primary reason behind the loss on foreign exchange of CAD 951 million in the Q3 versus losses of CAD 136 million in the Q3 of 2021.
It is important to note, however, that the bulk of this recorded foreign exchange loss of CAD 862 million to be precise is the result of non-cash remeasurement of long-term debt and lease obligations. Therefore, any foreign exchange impact will only be realized when we actually pay such debt obligations. We do have a foreign exchange hedging structures in place, and the commercial focus areas like increasing Sixth Freedom traffic and Aeroplan's continued international growth also provide a growing natural currency hedge. As for liquidity, at the end of the Q3 , total liquidity was CAD 10.2 billion, comprised of cash equivalents, short and long-term investments. It also included the amounts available under undrawn credit facilities as well as funds held in trust by Air Canada Vacations.
This considers the capital expenditures over the quarter, as well as the repurchase of $207 million aggregate principal of our outstanding 4% convertible senior notes due in 2025. That repurchase was done for an aggregate cash price of approximately $249 million, including accrued interest. Following this repurchase, $540 million aggregate principal amount of notes remain outstanding. We are well above our targeted minimum total liquidity balance of CAD 5 billion. Our main priorities for the use of cash remain funding our growth and deleveraging. Now for some updates on our fleet. All 40 Boeing MAX aircraft on firm order have been delivered. We now have 31 A220s in the fleet and expect to be at 32, 33 by December 31. As you know, we have firm orders for 45 A220s.
The deliveries of 12 aircraft are expected to occur in 2024 through 2025. This week, we announced the conversion of the options for firm orders for an additional 15 A220s. These are expected to be delivered in 2026 and bring the total A220 fleet to 60 aircraft. Our A220 and MAX deliveries, complemented with our recently announced 30 A321XLR aircraft, will complete the renewal of our narrow-body fleet. In September, we are excited to announce our agreement for the purchase of 30 ES-30 electric hybrid aircraft, in addition to an equity investment of $5 million in Heart Aerospace. The first of such aircraft is expected to enter service in 2028. I will now pass it back over to Mike.
Thank you, Amos. With a number of very important strategic initiatives in place, we are taking action to seize the opportunities we see before us. Most evident of these is the ongoing rebuilding of our network, including for both passenger travel and cargo. Lucie spoke of the announcement of our expanded summer schedule and the restoration of several previously suspended routes. We have been adding capacity carefully. For the full year 2022, we expect our capacity to be about 73% of our 2019 pre-pandemic schedule. In support of our expansion, we are deepening existing relationships with key partners, such as through our transborder agreement with United Airlines. We've also found a new partner to extend our reach even further by negotiating a codeshare arrangement with Emirates announced in July.
This is a significant partnership that will offer our customers access to even more destinations in Canada and the Americas. It also opens up many new route combinations for travelers across Emirates and Air Canada's extensive networks in the Americas, the Middle East, Africa and Asia. Another central aspect of our strategic plan is our fleet renewal program, which Amos provided an update on. Our new aircraft are more cost-effective than those that they replace, increase our capabilities, and strengthen our competitiveness. They also contribute to our greenhouse gas emission reduction targets that are part of our Climate Action Plan. Our decision to acquire 30 ES-30 hybrid aircraft from Heart Aerospace underscores our commitment to invest in new green technologies. This is also why we committed with Airbus in July to work alongside other carriers on carbon capture technology.
More recently, we secured CHOOOSE as a new partner for our carbon offset program. In addition, we are continuously examining all elements of the customer journey to enhance the travel experience. Yesterday, we announced a suite of new product improvements, from lounges to onboard dining, to make travel more enjoyable for the Air Canada customers. Aeroplan is also a key area of focus. The program is outperforming our internal targets with the return of travel. It is winning awards, including for the best redemption ability as a top trending program at the Freddie Awards, and more recently, the best earning and redemption ability at the Frequent Traveler People's Awards. Aeroplan continues to strengthen this value proposition. One example being with this recent HotelSavers program that significantly broadens the program's ground offering. The quarter also saw other advances related to ESG.
Our commitment to safety first always, as well as our use of technology to promote workplace safety, were recognized by the OHS Canada Honours, where we won in the OHS culture and best use of safety technology categories. In the area of employee engagement, Air Canada was named one of Canada's best employers for diversity by Forbes. We are also recognized at the annual Canadian HR Awards for having the best corporate social responsibility strategy and just announced the expansion of our scholarships for women in aviation by joining forces with our partner, CAE. This is of great importance to our company as it is for our many stakeholders, and I'm very proud that we maintain our ESG initiatives despite the pressures of a global pandemic.
In fact, on account of ESG's increasing relevance to the investment community, we also published our first TCFD report for climate-related disclosures in August. Our annual Citizens of the World report was also released days later. It outlines our overall ESG achievements for 2021 and our ongoing commitments. Again, both reports are available on our website. Finally, this quarter, we marked the eighty-fifth anniversary of Air Canada's first commercial flight from Vancouver to Seattle.
Since that time, generations of employees, through hard work together, built a global brand around safety, innovation, and customer service excellence. We are looking forward to the next chapter and are committed to continue earning our customers' loyalty by providing safe, dependable, and consistently better service. We stand on a very robust foundation, and with the financial results announced today, our investments and strategic plan, we know we have a bright future in connecting Canada and the world. Back to you, Antoine and Valérie.
Thank you, Mike, and thank you all for joining us this morning. We are now ready for questions. In the interest of time, we kindly ask that you each limit yourself to two questions or one question and one follow-up. Should you have any additional questions, we invite you to contact us at Investor Relations. Over to you, Maude.
Thank you. We will now take questions from the telephone lines. If you have a question and you are using a speakerphone, please lift your handset before making your selection. If you have a question, please press star one on your device keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. There will be a brief pause while participants register for questions. We thank you for your patience. Our first question is from Cameron Doerksen from National Bank Financial. Please go ahead.
Yeah, thanks very much. Good morning. You talked a bit about, I guess, the outlook, especially for, you know, demand, and sun destinations. Can you talk about what maybe you're seeing on the yield front in Q4, especially as we move into the, I guess, the peak sort of Christmas season? Are you seeing any kind of change, positive or negative on yields, you know, in Q4?
Yeah, it's Lucie. Certainly as we look forward, we're not observing any softening on the yield side. In fact, you know, based on the booking curves, you know, the yields are holding, the average fares are holding. And as you know, we continue with the recovery here, there's also other opportunities for us to push up yield a little bit. You know, we have different ancillaries that are going back into the market. You know, the corporate travel profiles are changing a little bit. To answer your question, I would say no, there is no softening on the yield side as we look forward.
That's good to hear. My second question is, I guess, sort of related to Aeroplan. Obviously, this has been a huge success. You mentioned 950,000 members added in Q3. I guess my question is, you know, I just wondering how you sort of balance, you know, the growth of the program, the growth of the membership, and I guess some of the benefits that frequent flyers of Air Canada have kind of, I guess, learned to expect. You know, I guess I ask the question just because, you know, membership growth, I assume, is putting some limits on, you know, lounges getting busy, things like that.
I noticed last night there was the announcement about, you know, I guess, reducing the Aeroplan membership lounge access for certain tiers of frequent flyers. I'm just wondering how you sort of balance the growth in the program and I guess the benefits that come from it.
That's a very good question, and I think we have to look at it. You know, there's more longer term you know, benefits or program changes that we've done, and this you know, followed you know, focus groups, et cetera, you know, listening to our customers, and we adapted the program to meet customers' needs. Now, in the short term, post-recovery, and you highlight you know, a phenomenon that we are observing, which is the lounge capacity, and it's something that you know, a lot of airlines are experiencing as well. This is a short-term issue, and you know, we have made changes to the benefits with respect to access to the lounge for some of our members, and we will continue to do those kinds of things.
I think the fact that the program is growing and that we are, you know, increasing membership obviously is a very positive, you know, for Air Canada. I mean, it's positive from a redemption point of view. As you know, with the Aeroplan program, now customers have access to 100% of the seats. As you say, it's something that we do need to balance, but I think we're in a pretty good position as we continue our recovery here.
Okay. That, that's very helpful. Thanks very much.
Thank you. Our following question is from Kevin Chiang from CIBC. Please go ahead.
Thanks for taking my question. Maybe if I just look at the domestic performance, if I look at the yields in Q3, you know, outside of some anomalies during the pandemic, this looks to be the highest we've seen it. Lucie, you mentioned the strength of fares, and it's sticking. I'm wondering, you know, are you seeing any demand destruction, at least with the more price sensitive customers, or is that creating an opening for new competition? Obviously, a number of ULCCs are looking to start up here in Canada. Just wondering what you're seeing across the booking curve, just given, you know, the overall domestic performance looks to be very strong.
There's a couple things certainly for domestic. When you look at the yield, one thing that's quite important for us certainly is domestic. Some of the yield change versus 2019 is also impacted by stage length. If you look at, you know, the network that we're flying domestically, you know, we have a lot of long haul flying, a lot of transcon flying, which is very good. It's coming in at very, very solid average fares. Overall, when you look at the domestic yield, it does push the yield down a little bit. When you look at the makeup of the traffic within the domestic network, first, you know, you're right, we do have a leisure component, and from what we're observing, the leisure yields even for travel within domestic are holding.
We have also, as you know, a fair amount of corporate traffic that flies across our domestic network. Very encouraging signs, particularly on the corporate side for long haul traffic, that has returned very nicely. You know, yields are solid there as well. One area that we think will come back and may take a little bit longer. It's the short haul corporate business, which, you know, of course is high yielding for us as well. That's been a little bit slower.
You know, we have to keep in mind that our domestic network also connects a lot of our network, which, you know, in other geographies where yields are also quite healthy and, you know, the market is absorbing the increases, it is having a positive impact on our domestic service as well.
Okay. That's helpful. Then maybe just with all the currency moves, you know, the strenthening U.S. d ollar, the weakening euro, are you seeing that impact travel patterns? Like are you seeing that as a tailwind for Sixth Freedom, or are you seeing increasing demand from point of sale Canada to the U.S. into Europe just to reflect some of these, you know, significant currency moves we've seen the past few months here?
Well, I mean, we're certainly observing, you know, very good recovery point of sale, U.S. As I noted in my remarks, even for, you know, Sixth Freedom traffic, for traffic originating in the U.S., destined to international destinations, I mean, it was a record for us. Certainly point of sale, the U.S. is certainly very positive.
Okay. I'll leave it there. Thank you very much. Congrats on a good Q3.
Thank you. Following question is from Savanthi Syth from Raymond James. Please go ahead.
Hey, good morning. I was kind of curious if you can give some kind of early indications on how you're thinking about 2023. Just kind of given the Transporter JV, it looks like you're planning on some kind of good growth across there. Are you still thinking about kind of getting back to like 90%-95% capacity by the summer, or has that view kind of moved up given how strong things are looking these days?
Good morning, Savi, it's Mike.
Sorry.
We'll provide, first of all, first guidance like we have in the past, when we release our year-end results. We're still tweaking the schedule. The schedule's in place right now. It does show growth, and you've seen each quarter successively in 2022 sequentially increase from 73%, 79%, 85% in Q4. Again, we'll provide more color and clarity in February when we speak to the marketplace. Again, we're still tweaking a couple things right now.
Maybe just on that and for my second question, just, you know, what's the capability on the top end of, you know, given the assets and the people that you have? I'm curious. I think I saw that there was an offer made to pilots recently that got voted down, and I think it had some kind of maybe pay improvements, but in return for some training flexibility. I was just kind of curious, you know, where you are in terms of the ability to flex up and also, you know, maybe what you were trying to achieve with that offer.
Yeah. It's a good question. We certainly have the ability to flex up. Our negotiations with pilots, you know, would have given us a little more flexibility at the end of the day. Still, even with what we currently have in front of us, both from aircraft and people, we can certainly flex up next year.
Could you like, kind of, is that flex up to back to 2019 levels, above 2019 levels?
We never expect to get to 2019 levels in 2023 in sort of our long range plan. That was more of a 2024 objective. Certainly, like I said, we're still looking at opportunities where we can flex up. You know, listen, we've put out a very aggressive summer schedule with, you know, new locations and resumption of services that we had suspended. We like where we are right now, as we look into early next year, from a demand perspective, from a yield perspective, and from a capacity perspective. Again, we'll provide more color, in February when we speak to the market.
Appreciate the color. Thank you.
Thank you. Our following question is from Chris from ATB Capital Markets. Please go ahead.
Yeah, thanks folks. Maybe just following on that question from Savi Syth a little bit. Thinking about fleet, and I'm thinking about a couple of things. With the Pacific market, you know, one of the arguments for having the 777 was to handle some of those higher capacity markets. I'm also thinking about the A220 a little bit. A couple of questions here. You know, if the Pacific market is starting to shift a little bit, you know, is there an opportunity or thought around redeploying the 777s into different markets or in different ways? Then, thinking about the A220s just to start, a couple of the other operators have talked about Airbus building a larger variant of that. Is that something you might be interested in? If so, you know, could you convert some of these options that are in the out years maybe to a larger gauge?
Okay. Hi, it's Lucie. On your question regarding the 777s, in fact, we are doing that. We have you know, as a result of some of the issues with China, some of the issues with the overflights impacting our India, we have you know, realigned the network and made some move with the 777s. We're also always you know, looking for opportunities as well to be able to you know, better balance and remove some seasonality you know, where we have the opportunity to you know, look for new markets you know, during winter operations.
Bangkok, for example, is a perfect example of that that will be starting in December. As we look to, you know, we navigate our way through the recovery and we see, you know, opportunities for us to rebalance that and, you know, look to redeploy some of the 777s, it is something that we actively do.
Good morning, Chris. It's Amos. On your question on the larger variant potentially of the A series, the A220 dash, we have the 100 dash 300 and rumors of dash 500. It really doesn't sort of fit within our fleet makeup as it is. If you recall, now look at our fleet, we've got the 220s, then sort of next size up is the MAXs, and then beyond that is the XLRs. Really fairly much, you know, covered what we need from a narrow body perspective, as I spoke about in my remarks there from a fleet replacement and renewal perspective.
Okay. That's helpful. You know, moving on, maybe just talking a little bit about, we touched a little bit on labor. You know, I guess next year it might be a bit of a topic. You have some contracts in 2024. As you're thinking about a lot of these different moving parts as you get restarted and maybe think about the next phase of growth, how do you think the negotiations in the labor front you're positioned, you know, next year? I mean, these over the last few years have been, you know, there's been different variations on a theme. Just how should we be thinking about the process as we go into next year?
Chris, it's Mike. I mean, it's difficult for us to speculate as something that's gonna happen. Our first contract with the pilots ends in September 2024. It's difficult for us to speculate here how those conversations are gonna go. We enjoy a strong relationship. We're recovering very quickly. You know, we'll engage in discussions with them at the appropriate time and see where it goes. I mean, obviously, you know, a lot of U.S. airlines are currently negotiating with labor groups, and we're not gonna be any different. We're coming off our 10-year agreements, which have been very successful for the company and all the employees of the company. We'll engage at the proper time with ALPA and other unions as their contracts come up.
Okay. I'll leave it there. Thanks, folks.
Thank you. The following question is from Stephen Trent from Citi. Please go ahead.
Thank you, everybody, and I appreciate you taking my question. Just two quick ones. Maybe Amos, maybe the first one for you. You mentioned FX hedging, and I was wondering if you could maybe give a little more color on, you know, whether that's kind of primarily focused on the leases and debt or, you know, how you think about the program operationally. Thank you.
Yeah. Good morning, Steven. On our FX, we have an 18-month hedge book, if you will, on currency, which basically covers about 60% of our needs. We don't really hedge on our debt side because again, that's sort of driven by maturity dates and so forth, which are out longer, you know, out to 2025, 2026, 2027. Our program is really focused on 18 months, and that really covers fairly much all of our operating expenses of U.S. dollar-denominated operating expenses. It certainly doesn't quite cover fuel, but from a fuel perspective, we're managing that through essentially fare increases. You know, our book is. That's how our approach is to foreign exchange hedging. Of course, the natural hedges we get from U.S. point of sale revenues, Aeroplan as well, and other currencies which are then also converted into U.S. dollars.
Okay, super. I really appreciate that, Amos. Just really quickly, you know, broadly speaking, when we think about your alliances, any sort of high-level view on how you might quantify, you know, how much revenue growth you might expect from the United Airlines partnership in terms of, you know, maybe incremental top-line growth? Thank you.
It's a little bit difficult to assess that way. Let me tell you particularly with respect to the agreement with United. We've had a very solid relationship with United for a long time. This next phase, though, with the transborder venture, will certainly help us from a, you know, point of sale U.S. for, you know, corporate demand, you know, that type of travel. This will also be very, very beneficial for our customers. You know, this advancement in the JV, there are a lot of benefits, you know, where we look to offer reciprocal benefits on each other.
It's a little bit difficult to, you know, comment on exactly what the revenue growth would be as a result of the joint venture. Certainly this takes us up an extra notch here. You know, certainly the best joint venture transborder by far.
Okay. I really appreciate that then, and many thanks for the time today.
Thank you. Our following question is from Konark Gupta from Scotiabank. Please go ahead.
Hello, this is Amina. I'm calling, Amos Associates. My question is: How do you plan to approach capital allocations besides purchasing aircraft? Do you have any flexibility to retire some debt?
Yeah. Good morning. It's Amos. On our approach to capital allocation, it's really, as you said, CapEx funding our growth. Our second priority is on deleveraging. You saw some activity this quarter here, this last quarter, I should say, where we paid down, we bought back $250 million roughly of the U.S. dollar-denominated converts. You know, are there other opportunities? It's something that we continue to look at. There are a number of items that we're exploring. Again, our focus would be to deleverage as we've outlined before. We do carry a bit of excess cash, as you've seen from our numbers. You know, we'll continue to explore it. Where there's an opportunity, we'll step into it and delever.
Thank you. No further questions.
Thank you. The following question is from Andrew Didora from Bank of America. Please go ahead.
Hi. Good morning, everyone. First question for Amos. Just the CAD 1.33 per liter fuel guide for the full year seems a little bit high. I know FX influences that number, but I guess it implies a Q4 kind of per liter metric that's kind of one of the highest on the year for the quarter. Just curious, can you kind of walk us through how you built up to that number?
Yeah. Good morning, Andrew. Fuel price is not my favorite area and certainly has been challenging. We continue to see a lot of volatility essentially in New York Harbor pricing. You've seen, you know, you saw the spikes earlier back in April and May. Again a couple of weeks ago, it spiked again and continue to spike given essentially, you know, availability of pipeline tankers, all sort of East Coast refining capability. You know, that dislocation continues to be extremely volatile. Then the crack spreads are really have not returned anywhere near to their historic levels and continue to remain at really stubbornly high prices, $50-$60 on crack spreads.
You know, when we looked at it at the time we were putting our forecast together, given all the volatility, we built it up based on what we were seeing at that point with New York Harbor pricing, our exposure to that given our East Coast purchasing based off of New York Harbor pricing. That's really is what's driving that and what's driving the price of fuel per liter up, you know, the whole volatility in the New York and New York Harbor.
Got it. What percentage of your fuel is, do you get from, that is benchmarked off of New York Harbor?
Roughly about 45% of our fuel is exposed to New York Harbor pricing, fairly much everything from Toronto out, all the way out east. Now, what we do to-
Got it.
You know, manage and mitigate that, you know, we take a number of actions. One, from a tankering capability on flights with fuel through dispatch. The second area is we continue to actually rail fuel from the west, from the Prairies over to East Coast, and to our storage facilities there to help mitigate the impact of pricing and continue to sort of explore other options of bringing in barges or fuels up from the Gulf Coast, up north here. Lots of actions there to try and mitigate this. You know, right now this is, that's the exposure that we have, Andrew.
Got it. Okay. That was a little bit higher than I would have thought. Thank you for that. Second question is for Mike. You know, I know you reiterated your full year EBITDA outlook. That seems like a pretty wide set of outcomes in Q4. As Amos just said, fuel is volatile. Is there a bias that you have to the high or low end of the full year margin outlook? Thanks.
Hi, Andrew. Good morning. I always have a bias to the high end. Again, we kept the range in place for the reasons you spoke about and everything. You know, we like where we are. You know, we've delivered really solid Q3 results and those trends are moving into Q4 and into next year. Again, we like where we are. You know, hopefully it you know our results for 2022 come to the high end, but we'll be able to tell you that in a couple of months.
Okay. I tried. Thank you.
Oh, yeah.
Nice try.
Thank you. Our following question is from Walter Spracklin from RBC Capital Markets. Please go ahead.
Yeah, thanks very much. Good morning, everyone. I wanted to come back to the A220. Obviously, having covered Bombardier for some time, we got intimately close to that aircraft. I do like it very much as a passenger. I think it's ideally suited for your network. I mean, correct me if I'm wrong, these long, thin routes, especially in a kinda rebounding environment, this kinda hybrid, you know, regional slash narrow body with some nice wide body complements to it, you know, overhead bins and so forth, just makes it, to me, a really good aircraft for your network.
I'm curious as to whether you view it as a strategic advantage in Canada. It seems particularly suited to Canada. If so, do you expect it, you know, to have an advantage there in Canada? Can you bring that elsewhere, particularly in the transborder, some of that advantage, and really focusing and drilling down to see if that's your intention here with this particular aircraft?
Hi, it's Lucie. Absolutely. It is a very big competitive advantage for us in Canada, you know, for travel within domestic. That's, you know, with the premium cabins, obviously, you know. The second thing is for transborder, not only just for traffic between Canada and the U.S., but you can imagine an environment where we would have, you know, A220s operating transborder sectors connecting to our international network.
For us to be able to continue with our strategy to grow our presence, you know, in the Sixth Freedom markets, the A220 is actually a very solid tool for us. There's no doubt, even for domestic traffic, if you look at the A220, it is for sure a competitive advantage. You noted how much you appreciate it. You know, the service on board, customers are giving us the very same feedback. It's very, very well received.
Absolutely. Second question here is on travel propensity relative to prior seasonal trends. Certainly coming out of COVID, you were, you know, leisure ramped up quite significantly, perhaps above seasonal levels. Business travel still lagging. We have a few internal metrics on propensity to travel that remain surprisingly high given, you know, there's been some disruption in travel plans recently and there's a, you know, weakening in economy and so forth. It still seems to remain high on leisure.
Are you seeing the same thing going into the Q4 here that leisure seems to be seasonally high compared to pre-pandemic? Secondly, anything on business travel? I know it's hard to measure, but I know you have good tools to measure that. Any view as to. I know you had expected, Lucie, that to come back up to pretty much normal level almost by 2023, certainly by 2024. Any change in that view on business propensity to travel as well? Those two, leisure and business.
Okay. Maybe I'll start with the business. Basically we've seen steady improvements month-over-month with respect to corporate travel. You know, certainly we thought post Labor Day we would see another level of improvement, and we did observe that. The other thing that we've also, you know, been able to sort of, you know, better understand is it's this new travel that is, you know, the purpose is business, but it's not necessarily contracted with a corporate account at Air Canada. Just by looking at the characteristics of some of our customers, we can determine that although they may not, you know, be part of a corporate agreement with Air Canada, we have pretty good insights that they are traveling for purpose business.
For example, you know, we can see the duration of trips is extending a little bit. We can see, you know, based on the days of week when travel occurs, how many passengers are on PNRs, et cetera. Based on that, we're actually also observing some pretty good improvements month-over-month. With respect to corporate, you know, will we ever return to 2019 levels for pure corporate the way we knew it? You know, we'll have to wait to see, but there's no doubt that, you know, we are seeing a new type of business traffic here. You know, customers combining a business trip with leisure. There's definitely new segments, you know, that are emerging post-pandemic.
What I can also say is from an average fare point of view or from a yield perspective, the corporate demand is also quite solid. You know, that's improving nicely, I would say. With respect to leisure, there's no doubt that the comment you made at the beginning is very true. We continue to see levels for leisure demand or leisure bookings that exceed 2019. That is across most of our leisure routes. You know, we look to the winter. We're quite encouraged.
That's great color, Lucie. I really appreciate it. Thank you.
Thank you. We have no further questions registered at this time. I would now like to turn the meeting back over to Ms. Durand.
Thank you, Maude. Thank you again for joining us this morning. Once again, if you have any further questions, we invite you to contact us at investor relations, and we wish you a nice day.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.