Good morning, and welcome to Air Canada's 2Q 2023 results conference call. All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question and answer session. To ask a question, you'll need to press star, followed by one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Valerie Durand, Head of Investor Relations. Thank you. Please go ahead. Thank you, Julianne. Hello. Bonjour, et bienvenue à notre deuxième revue trimestrielle de 2023. Welcome, and thank you for attending our second quarter earnings call of 2023. Joining us this morning are Michael Rousseau, our President and CEO, Mark Galardo, our Executive Vice President of Revenue and Network Planning, and John Di Bert, our new Executive Vice President and CFO. Welcome on board, John. Also in the room today are Arielle Meloul-Wechsler, Executive Vice President and Chief HR Officer and Public Affairs, Marc Barbeau, Executive Vice President and Chief Legal Officer, Mark Nasr, Executive Vice President of Marketing and Digital, and President at Aeroplan, and Kevin O'Connor, Senior Vice President, Global Airports and Operations Control. To begin, Michael will give us a brief overview of the quarter. Mark will talk about our revenue, network, and demand trends, John will touch on financial performance and guidance before turning it back to Michael. Following this, we will take questions from equity analysts. Our comments and discussions today may contain forward-looking information about Air Canada's outlook, objectives, and strategies that are based on assumptions and subject to certain risks and uncertaincy, uncertainties. Our actual results could differ materially from what any stated expectation. Please refer to our forward-looking statement in Air Canada's second quarter news release that is available on aircanada.com and on Sedar. Now I'd like to turn over the call to Michael. Great. Thank you, Valerie. Good morning to everyone. Bonjour a tous et a toutes. Thank you for joining us. John, welcome to Air Canada. I look forward to seeing your leadership help our entire company and the finance organization continue to excel. Our quarterly operating revenues reached CAD 5.4 billion, up 36% from the second quarter of 2022. Operating income totaled CAD 802 million, a year-over-year improvement of over CAD 1 billion. Adjusted EBITDA of CAD 1.2 billion was up by more than CAD 1 billion as well from the same period last year. Our Adjusted EBITDA margin reached 22.5%. We carried more than 11 million customers over the quarter. That is a 23% greater than in the same period of last year. Traffic growth outpaced capacity growth, with an impressive system load factor nearing 88% in the quarter. This continues. Our load factor reached almost 91% in July, reflecting the overall strong summer demand. Passenger revenues totaled CAD 4.9 billion, about 42% higher than a year ago. As we look ahead, advanced passenger bookings remain solid for the balance of 2023 and now into Q1 2024. Mark will expand on the demand environment in his remarks. I thank the entire team for their dedication to customer service and for collaborating with our partners, who also share the responsibility of ensuring a smooth customer journey. I congratulate all employees on delivering a strong quarter and recently winning some very important awards. These includes a recognition of our people's spirit and expertise at the 2023 Skytrax World Airline Awards in June. For Canada, our employees won the Best Airline Staff and Best Airline. Air Canada Rouge also won Skytrax Best Low Cost Airline, and Air Canada received the inaugural Global Award of World's Most Family-Friendly Airline. These are significant as they mark us as a leader in leisure travel. We're all very proud of these awards, but know there's still work ahead of them. We had more employees trained, better coordination with our key ecosystem partners, and improved tools than last summer, which resulted in strong operational results in both April and May. Yet our June and July operations were not at expected levels due to several factors. We are increasing our efforts to protect the customer journey from disruption, regardless of the cost. This includes using any influence we have in such instances as attrition at our principal regional partner or global supply chain issues, or working to mitigate the effect of situations beyond our control, such as increasing disruptive storm activity in our key hubs and markets. We are confident that our efforts will generate positive outcomes. Cost discipline and deleveraging remain top priorities for us. John will cover both in more detail. We ended the quarter with CAD 9.6 billion in cash and cash equivalents and investments. That includes an early repayment of CAD 650 million in EDC loans in the quarter. Our cash position enables us to confidently execute our business plans, move forward with new initiatives, and continuously invest in customer service. I thank our customers for entrusting their travel to us and for their loyalty. We're more determined than ever to deepen this loyalty through elevated customer service. Mark, over to you. Thanks, Michael, and good morning, everyone. Bonjour, je suis heureux de m'adresser à vous aujourd'hui. J'aimerais remercier tous nos employés pour ces excellents résultats. We're pleased with our second quarter performance. We owe these results to the effectiveness of our network diversification strategy and to a strong performance in several areas, and we're excited with what we're seeing ahead. For Q3 2023, we plan to increase Air Canada's system-wide capacity by roughly 11% from the same quarter in 2022. For the full year, we are looking at a year-over-year capacity increase of about 21% versus 2022. Now, let me get back to our results. Passenger revenues reached CAD 4.9 billion in the quarter. These results stem from the strength in passenger demand for a wide-ranging international network, record sixth freedom revenues, and continued Aeroplan redemption strength. In the quarter, we saw year-over-year gains in yield and unit revenues across the board. Domestic performed to expectations, and our transborder revenues grew 36% from the second quarter of 2022 on a 21% capacity increase. Sixth Freedom revenues were above what they were in the second quarters of both 2022 and 2019. In fact, Q2 2023 was the strongest sixth freedom quarter Air Canada has ever seen. This traffic is an important contributor to our diversification strategy, as it evens out some traditional seasonality, peaks, and valleys. We believe that we're still in the early phase of reaching our full potential in leveraging sixth freedom traffic to our hubs. Further to a strong sixth freedom performance, our Transborder network performed above expectations, anchored by the initial success of our joint business arrangement with United Airlines. This allowed us to start new routes, such as Toronto, Sacramento, and in many cases, restore pre-pandemic frequencies to a variety of routes on the Transborder network. We're particularly pleased with our international performance, representing about 70% of the year-over-year increase in passenger revenues. Demand for Transatlantic services was stronger as compared to last year, translating into a 19% capacity growth and a 9 percentage point increase in load factor. This year, we restored services, increasing frequencies to certain destinations like Toronto, Rome, and Toronto, London, and launched new routes on the European market, including Montreal to Amsterdam, Toulouse, and Copenhagen. We're pleased with the results from our new routes, which met or exceeded expectations. We saw strength in leisure demand, particularly to markets in Southern Europe. Our strategic partnership with Emirates led to very strong results on our Dubai route, and the outlook for Transatlantic demand continues to be favorable in the second half of 2023. In the Pacific, we more than doubled our capacity to that of last year. We restored services to Osaka from Vancouver and Tokyo Haneda from Toronto. In fact, we restored more than our full 2019 capacity to Japan. The high loads on the Pacific, reaching a 93% load factor, reflect continued strong demand. The growth in capacity and traffic led to strong revenue and yield gains, even though capacity to China remains limited. Our Pacific passenger revenues increased 2.5 times compared to the second quarter of 2022. We also announced new services such as Vancouver to Singapore and Dubai, demonstrating our commitment to rendering Vancouver as a global international hub for Asia Pacific travel from North America. Our comprehensive network, which is bolstered by our strong international presence, has us well-positioned to capture the demand we're seeing. Air Canada Vacations continue to see strong demand for leisure travel. I want to underscore that this demand is an important barometer of leisure demand sentiment, and this indicator continues to be favorable as compared to both 2022 and 2019. Another indicator of strength and projected future demand is Aeroplan's continued record growth rates, which deliver proportionally strong travel redemptions. We recently unveiled our most extensive winter sun schedule, with added frequency and capacity to popular destinations like Cancun, Los Cabos, and Punta Cana. In fact, we are increasing our capacity from all of our major hubs to sun destinations this winter. Air Canada Cargo expanded its network in the quarter, adding services to Punta Cana, San Jose, Costa Rica, and Basel. As we saw with our peers, our cargo business experienced lower volumes and yields in the second quarter of 2023. This was somewhat expected, given the normalization in cargo yields from extraordinary highs at the beginning of the pandemic. Still, we made good progress, expanding our fleet to six freighters from the three that we had at the end of 2022. We're closely watching how this market evolves to capture strategic opportunities. Our overall cargo diversified revenue stream can also offset some of the seasonality in the passenger business. Now over to you, John. I look very much forward to working closely with you. Thank you. Thank you, Mark. I'm thrilled to join you, Michael, and Valerie on this call. I'm excited to work with all of you. Good morning. Bonjour à tous. Je suis ravi d'être parmi vous aujourd'hui et d'avoir le privilège de me joindre à la grande famille d'Air Canada. It's truly a pleasure to speak with you today. It's exciting to join this dynamic industry, as well as the passionate and talented Air Canada team. I'm grateful for the warm welcome that I've received, and I'm looking forward to building strong relationships with all of you. On to the results. Michael spoke to our financial performance generally. Mark touched on our strong passenger revenues. I'll begin with our second quarter operating expenses. These totaled just over CAD 4.6 billion for the quarter, increasing 9% from the second quarter of 2022, primarily due to the higher levels of flying and customers we saw in the period. The increase was partially offset by an 18% decline in aircraft fuel expense stemming from a 31% decrease in jet fuel prices from the same period in 2022. Overall, second quarter Adjusted CASM was CAD 0.133, roughly 1.6% in the second quarter of 2022. The unit cost was impacted by higher passenger service costs from increased traffic and higher selling costs, which are directly correlated to greater revenues and the year-over-year growth in full-time equivalent employees. In fact, you'll have noticed that wages, salaries, and benefits grew 24% in Q2 2023 from the same period a year ago. This reflects a 22% growth in full-time equivalent employees year-over-year, as we rebuilt our operations throughout 2022 and hired and trained people to prepare for this summer. We have now reached the stable levels, and employee turnover has normalized to historical rates. As we continue to grow the airline and add capacity, you can expect to see meaningful improvements in productivity. Our optimized and efficient fleet is central to our strategy. In the second quarter, we added one Boeing 787-9 and one Airbus A330. Our second quarter delivered strong free cash flow of $965 million, $537 million more than the same period in 2022. We ended the quarter with CAD 10.6 billion in total liquidity and a leverage ratio of 1.7, down from 5.1 at the end of last December. Our strong cash flow and liquidity position allow us to fund our future and to deleverage, and we've been paying down debt where it makes the most sense. A recent EDC loan prepayment and the repurchase in 2022 of some Air Canada's outstanding 4% convertible senior notes, results in a combined reduction of about CAD 72 million in annual interest expense. Let me turn up to our full year expectations and provide some color as we update our guidance. First half performance was strong. We entered to the second half with good visibility, given CAD 5.7 billion in advance ticket sales, continuing strength in demand, and notwithstanding some headwinds that lie ahead, a good view on cost. As such, we are raising our lower end and narrowing our range on full year EBITDA guidance to between CAD 3.75 billion and CAD 4 billion. We also modified our Adjusted CASM guidance for 2023 to reflect our revised full year capacity assumptions and to adjust for various expense items due to the evolving cost environment. We now expect full year Adjusted CASM to land roughly within 0.5%-1.5% above 2022 levels. Notwithstanding the fact that this is a full year number, I can tell you that leading into Q2, we have made good sequential progress. We also expect to continue to see further productivity improvements flow into our cost structure through the summer. In preparing our updated 2023 guidance, we assume that the Canadian dollar will trade on average at $ 1.34 per US dollar, and that the price of jet fuel will average CAD 1.08 per liter Canadian for the full year 2023. Going forward, we have taken a position to hedge a portion of our Q3 fuel. You can refer to our public disclosure file for information on this. As to our 2024 targets, we are not providing updates at this time. We will continue to evaluate them as we progress with our plans and execute on our strategy through the second half of 2023. Let me now turn it back to Michael. Thank you. Great. Thanks, John. We're now in the middle of our busiest period of the year. Our load factors are high this summer, which, while positive, also adds complexity to running an airline when disruptions occur. In advance, we've made extensive preparations by hiring more people and changing our schedule to reduce our traffic peaks and smooth customer flows to some degree. Our employees are more experienced than last summer, and this has contributed to our operational stability. Our flight completion level and baggage delivery ratios are stable, and we're continually evaluating and making adjustments to protect the customer journey. The air travel ecosystem comprises many participants, and we're doing our part to help each partner fulfill their roles for which they're accountable. We've seen significant improvement in industry metrics over last summer, and together, we are committed to strengthening the system. We are doing so while navigating through an evolving regulatory environment, which is affecting crew availability and ultimately our flying schedule. We welcome the opportunity to work with Canada's new Transport Minister, Pablo Rodriguez, to bolster the air transport sector. There are many critical files, such as the production of SAF in Canada to support the net zero by 2050 ambition, the need to invest in airport infrastructure to safeguard operational efficiency and support GDP growth, as well as ensuring airport costs become more competitive with global competitors. This last matter continues to be a challenge with the recently announced review of the Passenger Protection Regulations and increased costs to be borne by the industry. Our user pay model is not appropriate for the current environment. We've taken other steps that are reinforcing our operation, securing interim lift, including by partnering with PAL Airlines and signing a wet lease arrangement with Omni. We're also looking further ahead. We have continued to diversify our network, shifting capacity to where we can generate better returns on our aircraft, like the new international routes Mark spoke to. Our partnerships, like the one with flydubai, are key as these will expand customer choice with flying between Canada and the world. We anticipate increased immigration will continue to strengthen the vibrant visiting friends and relatives market and contribute to trade, further, furthering corporate travel opportunities. We're also transforming the way we sell and distribute the product by introducing new modern technology options for the travel agency community and additional choices for our joint customers. These capabilities are supported by IATA's new distribution capability or NDC. During the quarter, we expanded our successful long-standing partnership with Amadeus, and we announced a strategic distribution and retailing agreement with Sabre. These arrangements, when combined with other elements of our strategy, are already delivering substantially lower distribution costs. They'll enable us to scale continuous pricing, dynamic offers, and other exciting revenue optimization strategies in the quarters ahead. Our digital investments now extend throughout the customer experience. This includes increasing the use of technology, such as expanding our biometric facial recognition pilot program for customers to board aircraft and to welcome guests into our lounges. We also continue to integrate AI into our business, most recently in our contact centers, and we've begun renovating cabin interiors on our narrow body fleet, upgrading our Wi-Fi and in-flight entertainment offerings, and launching exclusive original programming like Mattel and Apple TV+. We're elevating the customer experience through key investments, including new lounges, a Maple Leaf Lounge in San Francisco, and a new Aspire Air Canada Cafe at Billy Bishop, both opening to great reviews from both customers and the media alike. We've also added facilities at Newark Liberty with a co-located lounge within the United Club, a novel model that further builds upon our successful transporter joint venture. Aeroplan is a key component of customer loyalty, continues to grow at record levels on all key metrics. This success opens incredible opportunities, and all throughout the quarter, Aeroplan launched new key initiatives to promote engagement. This included new and expanded partnerships with Bell, Brooklinen, and Uber for groceries. Aeroplan's success was affirmed at the prestigious Freddie Awards, where it led North American loyalty programs, winning Airline Program of the Year, Best Promotion, and Best Redemption Ability. Another aspect to loyalty is a premium that customers place on corporate responsibility, and throughout the quarter, we announced several initiatives to advance our ESG goals. One is our partnership with the In-Service Aircraft for Global Observing Systems, or IAGOS, an international research organization that uses commercial aircraft as a platform to monitor climate data. Through this agreement, we are outfitting an Airbus A330 aircraft with special diagnostic sensors. We also announced agreements to purchase sustainable aviation fuels in San Francisco and Amsterdam from Neste. Apart from reducing emissions, these agreements also demonstrate the viability of SAF and its importance to our industry. Once again, we urge governments in our country to be part of the global opportunity. We in Canada need to recognize the potential of SAF, both commercially and for our environment, and invest appropriately in the development of these fuels, as other countries do. We look at corporate responsibility as a whole and are focused on all aspects of our business, our people, and the communities in which we live and work. To this end, we continue to pursue our diversity, equity, and inclusion policies and initiatives. Our Accessibility Plan is an example of this, affirming our commitment to enhance accessibility for our customers and employees with diverse abilities. We're very proud to contribute to Canada's objective to be barrier-free by 2040. We're also pleased to continue with one of our most popular community activities. Air Canada operated three Dreams Take Flight missions in the 2Q, flying children from Winnipeg, Halifax, and Toronto to Florida to experience a trip of a lifetime. Another five such flights are scheduled for the rest of the year. The Air Canada Foundation continues to elevate communities in Canada. In the second quarter, it dispersed the CAD 1.6 million it raised last year to Canadian charities to help children spread their wings. I invite you to visit the foundation's website and read its recently published impact report to get an in-depth look at the magnitude of its reach. As these examples show, aside from producing solid financial results, Air Canada has a significant positive impact on our communities and does a lot of good for all stakeholders. This is ingrained in our core values of care and empathy and contributes to our employees' commitment and motivation to work hard every day to meet expectations, even when we face difficulties. It cannot be said how often enough how proud we are of this. We are determined to rise higher in an increasingly complex industry and environment, continuously striving to meet our customers and other stakeholder expectations. Thank you to our employees, our investors, our customers, and our suppliers. Their support is key for securing a bright and sustainable future. With that, I'll turn it back to Valerie. Thank you, Michael. Thank you all for joining us this morning. We're now ready to take your questions. Should you require further details following this call, our investor relations team is available for support. Back to you, Julianne. As a reminder, to ask a question, please press star followed by one on your telephone keypad. In the interest of time, we ask that you please limit yourselves to one question and one follow-up. Thank you. Our first question comes from Helane Becker from TD Cowen. Please go ahead. Your line is open. Thanks very much, operator. Hi, everybody, and thank you very much for the time. Bonjour. I just have a couple of questions. The first question has to do with cargo. You know, we're seeing FedEx and UPS in the U.S., and we're seeing cargo volumes decline, and you mentioned that in your prepared remarks. Just wondering, is it too aggressive to have six aircraft in service and maybe three was right? How are you really thinking about cargo over the next few years in this declining volume? I have another unrelated question. Sure. Good morning, Helane. It's, it's Mark Galardo speaking. On the, on the cargo, for your piece, it's, it's important to note that our strategy here is more long-term focused, and the strategy is meant to be resilient, you know, to go through the ups and downs of, of what the cargo market is. To that extent, you know, we're taking a longer term view, and the view of the freighters is basically, you know, to bring freight into our hubs and connect it onto our extensive passenger, belly business. We're - you know, we see a lot of good long-term prospects in that strategy to really optimize our bellies, on our, on our passenger, business. To that extent, although we have some challenges near term, focus is really medium to long term on this business. Okay. That's, that's helpful. Then the other question actually came from a client this morning. You know, I know this to be a fact, too. I was looking at on-time performance. Air Canada tends to be in the bottom half of the crowd. Not sure, you know, of North American Airlines. Not sure how impactful that is. When you think about your operations, and you think about, you know, your customers, what's the compensation you have to do, how are you thinking about, improving on-time performance in, you know, in an environment where things are really busy? Good morning, Helane. It's Michael. That's a, that's a, a big question and something that we're very, very focused on. First of all, there are compensation rules under the APPR, APPR here in Canada. If we're delayed by more than X number of hours, you know, we, we, we pay the customers much like much like Europe. In fact, there's some changes going into, into the APPR right now that will make it much more aligned to, to the European model. That's one aspect, and we obviously fulfill our obligations under that system. We, we're spending a lot of time improving our on-time performance. Again, April and May were very solid. June and July, for a whole bunch of reasons, you know, a lot uncontrollable, like severe weather in Toronto, Montreal, and the East Coast of the United States, where we have large franchises, affected our, affected our OTP. But we're powering through that and building in more resiliency into, into the operation. And I've spoke in my prepared remarks about some of the things we've already done, and we will continue to, to elevate that, that strategy. Certainly an objective of ours is to continue to improve OTP so that we are, we, we don't have articles like we had yesterday morning. Okay. That's very helpful. Thanks, Michael. Our next question comes from Kevin Chiang from CIBC. Please go ahead. Your line is open. Hi. Good, good morning. Thanks, thanks for taking my question. maybe if I could just turn, turn to your, your guidance, and, and I know this is maybe overly simplistic, especially, you know, given all that's happening as you come out of the pandemic and, and, and maybe you have a labor negotiations upcoming in the back half of the year. if I look at historically, at least pre-pandemic, you know, your, your Q3 EBITDA was anywhere from, you know, 1.6 to 1.7 times what you did in Q2 versus, you know, more than double. If, if I apply that seasonality, it, it, it seems like you're tracking, you know, at the very upper end of your, your guide and, and maybe, maybe through it, depending on how summer plays out, which sounds like it's very strong. Just wondering how I should think about the puts and takes as to maybe why historical seasonality or that range might not hold, or maybe it's just conservatism in your outlook, or maybe it's a little bit of a buffer because of the labor negotiations. Just if you can frame how you think about the back half of the year, given what you've done in the first half of the year. Good morning, Kevin, it's Michael. I'll start with a couple of comments, and I'll turn it over to John, for, for some further comments. You know, we provided guidance for a long time from the company, and, and, you know, obviously our objective is to ensure that we make the guidance. There are a lot of factors involved in putting guidance together. It's an evolving environment, as I said in my prepared comments. You know, Q2, you know, the work that Mark and others have done here has allowed us to do better in Q2, with- especially with the sixth freedom traffic. That is, it's typically more beneficial to Q2 than it is to Q3. So that's a good thing from a seasonality perspective, from our perspective. So that's issue number one. Then issue number two, you know, we are seeing rising fuel prices, and so we had to ensure that we, we covered the sensitivity of, of rising fuel prices. John? Yeah, I think, you know, Michael, you covered, you covered in the comment on Q2. I think that Q2 was an exceptionally strong quarter. It's true that seasonality is always the case, that Q3 will come up quite stronger than Q2. Q2 here this year was very strong, and I think from that point of view, you know, applying maybe the 1.6 wouldn't totally apply in the same way that you may have done so in the past. When you look at full year guidance, I think Michael, you know, said it well. We've moved up the range because we, we feel strongly that the demand environment is holding the way we expected it. That the first half performance has been quite good. Q2 has given us the confidence to move up the range. You know, I'm not sure that, you know, the 250 space that we've left there, I think, is the right one. Okay. No, that's, that's great color. Maybe if I could just follow up on, on the, on the cargo question. You know, you, you, you discussed the, the seven six sevens you have, but what's happened in the cargo market recently, have you rethinking what your, what your plans are for the triple sevens that come in next year and, and beyond? Do, do you think you need to add more capacity on top of what you have? Like, does the long-term plan still support that? Kevin, it's Michael. Like Mark said to, to the question from Helane, you know, this is a long-term play from our perspective. There is a, you know, a strong synergy about putting product or cargo from, from our freighters onto our, our, our narrow bodies to go across Canada and into the U.S. We see that as a very, very viable business strategy as, as we go forward. Again, I, Q2, like other, other cargo operators, was not, you know, not very strong. We expected some, some decline post-pandemic, we had budgeted that, frankly, expected that. We're gonna continue to add capacity over the next next little while per our business plan. We're comfortable that we can, we can make efficient use of that capacity. Perfect. That's it for me. Thank you for taking my questions. Our next question comes from Fadi Chamoun, from BMO Capital Markets. Please go ahead. Your line is open. Good morning. Thank you. John, welcome to these calls. Thanks. I have a question on the CASM. I'm not sure how to characterize it, but, you know, ultimately, I'm trying to think about if there is a way for you to explain to us how much of these CASM inflationary pressures are kind of core inflation in wages and, and kind of overall economy, and how much of these pressures on CASM we're seeing are a function of just the aviation ecosystem being, you know, underperforming in its normal fluidity. You know, John, I think you talked about potential for productivity gain going into, like, how should we think about the trajectory of your CASM in a more fluid or kind of, you know, normalized environment? How much of the increases in that CASM in the last, you know, couple of years as you ramped up capacity, has been a function of those maybe transitory issues longer term? Yeah, thanks, Fadi. So I think more color will come as we look forward when we look at 2024. Just to give you some, some color on this now, I think we're up roughly, I think 6,500 employees from the summer of last year to the summer of this year, right? I think that's maybe a little bit of what you're referring to as well, and that's certainly what I'm referring to in my commentary on productivity. We will, we will grow into some of that capacity, but it was important for us to get ahead of it here for the summer of 2023, and I think it's proved to be the right decision, and we've seen very significant loads and what have you. Obviously the traffic, and we're being rewarded for that. That is a piece of the cost structure that I think will alleviate a little bit relative to CASM as we grow. There are some elements that, you know, it is a different cost environment, and that's just, you know, something that we, I think we, we absorb into our own business planning here. Regulatory changes, duty time, things like this are a little part of that structural change. Then ultimately, I think that we have seen, like everybody else, some inflation. Now, don't forget, some of the cost in our CASM is also coming from costs that are very revenue correlated, right? It's kind of, you know, the good that, you know, I mean, the what you pay for when you get that, that volume and traffic. We're seeing more premium cabin, and that's helping as well, overall profitability, but it's a more costly component of of the airline as well as we we support those customers with premium service. Altogether, I guess, you know, the last piece I'll maybe just say there before I wrap up is we did take a bit of a touchdown on on the capacity in the year. You saw we went from 23% year-over-year growth down to 21%. There's a few things that are impacting that. Some of the regional challenges with with just pilot availability. and, and some of our own fleet, just availability with respect to some of the aircraft that we're trying to put back in service, the triple seven, for example, and some of those A220s that do have some engine delays. All of that does kind of impact us as well when you look at the CASM expectation. I would say that over time will heal itself, but when and how, that, that'll take a little longer. Looking at 2024, you know, we'll, we'll be looking ourselves internally here for productivity that should come from the overall cost structure as we grow in. We do expect also that kind of the whole ecosystem will do better, and that'll help our costs, as well. Okay, just a couple of follow-up. I know you're not guiding to 2024, but do you still have kind of, you know, visibility or plan to ramp up capacity? You know, I think it was 100% of 2019 previously, or, or, or is that not the right framework to think about for, for, for 2024 at this point, and we should wait for your guidance? Just, you know, connecting to the first question, like, why go back on the hedging? You have been kind of not hedging for quite some time, and you've managed to do that with pricing. Why did you decide to kind of hedge fuel again now? Okay, great. Well, Fadi, you, you haven't left off at all from the last time we, we talked. I guess, let me cover both of those very quickly. You, you asked one about hedging, and the one prior to that was about. 2024. 2024 capacity. Yeah, thank you. Yeah, we do, obviously, we do have plans and, and, scheduled capacity to come online for 2024. We'll grow back, you know, towards those 2019 levels. My sense, and you, you know, you should wait for 2024 guidance to be more conclusive, but I think my sense is that we get to 2019 levels through the year at some point. We hit that pace. Will it be on a full year basis? You know, we'll see. I mean, let's, let's get through the next couple of months here and, and then we'll see how we can, we can, you know, get a better read on it. Certainly our intent here and our objective is to bring it to 19 levels in 2024 and, and then, you know, go from there. The question on hedging, simply say that, you know, when we looked at kind of get, let's call it the end of Q2, we looked at Q3 bookings, very solid. And we - no speculative kind of objective, but we looked at fuel, and that kind of had stabilized at a low level. Despite some pressure of, you know, oil cuts and what have you, and so we thought that just good to protect what was already sold tickets in terms of the fuel component of it. So we took a position to hedge some of that Q3 demand. Relative to a bigger comment on, you know, different philosophy or strategy, I would say not. I would just say that I think it was a prudent thing to do, in an environment where, you know, taking a position on fuel for Q3, that were kind of already sold through, the fuel was already sold through our tickets, was the right thing to do, and it just locked in at least some portion of that, of that dynamic. You know, from here on in, we'll just kind of continue probably to behave the much the way we have in the past, and if we have a different view, then we'll, you know, we'll talk about that as well. Thank you. Our next question comes from Cameron Doerksen from National Bank Financial. Please go ahead, your line is open. Thanks, good, good morning. Maybe a couple demand questions. I mean, clearly, demand is, is very, very strong, advanced ticket sales, you know, well above what we would have seen pre-pandemic. I'm just wondering if you're seeing any signs of, of weakness, particularly in the, in the domestic market. I mean, we've seen some of the U.S. carriers, you know, cite maybe a little too much capacity that's in the network, given where the demand is. Just wondering if you're seeing any of that in your advanced bookings. Good morning, it's Mark. You know, on, on the domestic network, one of the things that we, we always said is one of the, the strengths of our domestic network is the connecting network that we have to our three hubs, and that gives us access to a wide geography. To that extent, you know, the domestic indicators continue to look stable. We're, we're feeling, you know, we're generally pleased about what we saw in Q2. Going forward, it, it continues to be relatively stable on the domestic network. Okay. Maybe just a, a follow-on to that is, is around, I guess, business travel. I mean, you must have some visibility now on the post-Labor Day kind of demand. Are you seeing, you know, any signs of, of that picking up from sort of the stable we've seen in the last few quarters? Yeah. In fact, we're seeing a slight uptick in, you know, two sort of channels. One is sort of managed corporate. You know, that's been roughly at the -30% range for quite some time. We're seeing a slight uptick there. What's more encouraging is, you know, the non-contracted corporate, so, you know, SME, small business, and that's recovering much quicker, and, you know, quicker than anticipated. We're starting to see post-Labor Day, some, some pretty positive signals there. Okay. No, that's great to hear. Thanks. Thanks very much. Our next question comes from Walter Spracklin, from RBC Capital Markets. Please go ahead, your line is open. Yeah, thanks very much, operator, good morning, everyone, and welcome, John, to the call. I, I wanna, I wanna turn to load factors here and tie it in with your, the new configuration in your fleet and, a-and the, the service, a little bit of the on-time service issues that you've had and correlate the two. What I'm looking for is you know, you've got a different fleet than you've had previously. Does that mean you can run at higher load factors, going forward on, on a, on a long-term basis? Or, or in your efforts to improve your on time, do you have to bring load factors down? What I'm trying to do is, is see if, load factors that we assume going forward can, can be sustainably higher than where the, where they were pre-pandemic. Again, do you have to bring them down in order to address the service issues? Hi, Walter, it's Michael. Interesting question. We don't think there's a high correlation between high load factors and OTP performance. We think we can run at 84% or 88%, and it's not going to materially impact on time performance. It may impact if we have to cancel a flight, we've got less seats to put people on, but it shouldn't affect materially OTP performance. Can we run at those levels going forward? That's, you know, yes. It does mean potentially that we're spilling traffic. That is why, you know, we're bringing some more capacity on, on, on, on, on site, because we'd like to ensure we don't spill good traffic, basically, to our competitors. There is a balance there to, to, to some degree. Okay. That makes sense. Okay, thank you. My second question is, is coming back to cargo. One of your answers to cargo really makes sense to me, that you, you, you've got some really good opportunities to scale some of that cargo into your, t o make it much more economical into your belly, as opposed to on your dedicated freighters. I guess my question is: Are you still targeting the same number of freighters that you were targeting previously? Is there an opportunity with the tight labor environment to achieve some of the goals you had with your freighters, but not necessarily with your, with freighters owned by you? Possibly, we're not, we're not spending a lot of time thinking about that, that option right now. Right now, we're really focused on improving the performance of our freighters and obviously bringing the freighters into, into the operation. Okay, fair enough. Thanks very much for the time. Appreciate it. Our next question comes from Stephen Trent from Citi. Please go ahead, your line is open. Hi, yes, good morning. Can you guys hear me, by the way? Yes, yes. Okay. Sorry, just having some trouble with my phone. Thank, thank you for taking my questions. Just one thing there. First, you know, my heart goes out to you guys up north with the, the terrible wildfires and what have you. I'm wondering if those events have had any impact on your operations. Have you had to, you know, reroute? Have you had to transport fire crew, and maybe there's been some, you know, incremental flow on, on, on your network? Just wanted to get a sense of that. Thank you. Good morning. It's Michael. Thanks for the question. I mean, we, we'll, we obviously, given our, given our community perspective, we'll do whatever we can. We are doing whatever we can to support, as the situation. As it affecting our operation, marginally. We, we didn't call it out as, as an issue, frankly, and it's, it's, mostly on the regional side. So it, it hasn't had much of an impact, to date. Appreciate that, Michael. thanks very much. Just one other, quick question. appreciate what you've mentioned about the airports, and the, sort of pay system in the Canadian airports. In order to have a change occur there, is this something that, you know, Mr. Trudeau could, make some kind of decree and change it, or is it would it have to be something that would have to pass through a, you know, a long legislative process of some kind? Okay. Now you've asked me a question I could spend about another half hour on, responding. There have been several studies by very, very intelligent committees and, very knowledgeable committees about our, our business model up here, our, our, our airport model, recommending certain changes. There is other options available, but it, it would take a, a change in law, basically, that would, would take some time. I would say the pandemic, really has exposed the weakness of our user pay model. You know, we are pushing hard, to, to ensure that our airport infrastructure system continues to support operational efficiencies, investments, also, growth. you know, the airports obviously suffered through the pandemic, taking on greater debt, and, and so did we. It would be important for the government to support that type of growth opportunity with, with some injection to accelerate some of the objectives we have in mind. That, that also goes to SAF, as I said in my prepared comments as well. Oh, okay, I appreciate the color. Thank you very much. Our next question comes from Chris Murray from ATB Capital Markets. Please go ahead. Your line is open. Yeah, thanks, folks. Good morning. Just turning back to the sixth freedom traffic a little bit. Can we talk a little bit about, you know, maybe what are the drivers that actually got you to this number this quarter? I guess what I'm trying to figure out is, is how much of this is sort of tied to the fact that the U.S. market itself has been pretty tighter? Has there been something going on that maybe has changed sixth freedom in the last little while, be that Aeroplan or something else that you guys have been working on? Hi, it's Mark. There's a, there's a combination of reasons for this, but one of the things that we did, during the pandemic is we completely changed the structure of our network, interoperation, our hub airports to maximize sixth freedom. We've, we've peaked up our hubs a little bit to really facilitate that traffic flow. We're starting to see, you know, results, basically almost every single geography, in many cases, almost every single hub, in Q2 on the sixth freedom network. Which is something we didn't necessarily do as well, pre-pandemic. Good morning, it's Mark Nasr. Just to add one thing. The region in which Aeroplan is growing the fastest is the United States. Between that and our relationships, principally with JP Morgan, we're also able to introduce the brand and our product and service proposition to Americans more effectively than we were able to previously. Okay. That's, that's helpful. My other question, just, you know, going to the regional network. You know, historically, this has been kind of, you know, slow and steady, but it, it, it certainly was always getting the job done. I guess a couple of questions on this. I mean, is this a function of aircraft or people, or what's going on in the regional network that's really affecting its performance as much as it is? Does this force a change into you looking to have to do what was, you know, historically considered a regional lift inside Air Canada or maybe a different, view on strategy as we go forward? Hey, Chris, Michael. I don't think the strategy has changed. There's a transitional challenge right now with pilot availability. A series of factors have caused stress on pilot availability at that level, at that, at entry level. One, flight duty time came in, which caused all airlines to, in Canada, to add 10%-15% more pilots to fly the same schedule, given the new rules around flight duty time. Two, we have a lot of new entrants into Canada, all at the same time who are flying bigger planes and can afford to pay more money. Three, during the pandemic, we have a very, very elaborate school system, pilot school system here in Canada, which, which, which our regional partners is heavily involved in, and that didn't provide the supply that it normally would. We have this almost perfect storm that exists at this point in time. That has caused, you know, our regional partner, partner to lose more pilots than they otherwise would through, through a higher attrition. As a result, we've had to make some, some modifications to the schedule. We're working hard with our partner, Jazz, on solving that problem right now, and it will be solved, but it will take some time to transition. On the operational side, if we have disruptions, weather disruptions or anything else, we would typically want to cancel a Jazz flight because it, it impacts less customers than, than canceling a, you know, a Triple Seven, for example. You will see higher in weather and other disruptions, you will see higher cancellations over the Jazz fleet, which makes it difficult for them to operate because they've got to. We also have to put those customers on another plane in the next couple of hours or the next day. That, that is trying to minimize the impact to our customer, in, in, in weather, weather-related disruptions. Okay. I'll leave it there. Thank you. Our next question comes from Savanthi Syth from Raymond James. Please go ahead. Your line is open. Hey, good morning, everyone. I know you've been doing, kind of rolling out NDC, kind of various aspects of NDC. I was wondering if you could talk about that a little bit more, especially in the sense of kind of where will we see the benefits of that? Is that revenue or costs? You know, a timeline of, you know, when we might see some of these benefits flow through. For sure. Good morning, it's Mark Nasr. There's four principal elements to our distribution strategy that we rolled out during the quarter. The first is all new technology, supported by NDC, including a variety of options for travel agencies anywhere in the world connected to Air Canada. The second is improved and expanded commercial agreements with not just the GDSs, we've already announced Sabre and Amadeus, but also direct agreements with many of our large agency partners that allows for more efficiency in terms of cost perspective, expands our products that are on their shelf, in particular, ancillary revenue products, opening them up really for the first time in a meaningful way to third-party sales. The third is content differentiation. You've seen a lot of this, you know, in other markets, but now we have content that's exclusively available via NDC, and it's just the beginning. That will expand over time, causing more of a shift to those channels. The final one, the fourth element, is the DCR, the Distribution Cost Recovery program. Bookings now that are conducted through the less efficient or older technology out of fact platforms and the GDS incur a cost recovery. All those four things together are driving both decreased costs as well as increased revenue. Michael talked about the fact that our distribution costs are now materially lower. It affects both RASM and CASM. There's some CASM in there that's taken out, but there's also a lot of, in terms of the DCR, a RASM offset, because as we assess the DCR, even though it's meant as a cost recovery, it counts in the top line. In terms of kind of timeline as to, I mean, I'm guessing this doesn't kind of turn on on Day 1. How should we think about this building up over the next kind of two to three years? Sure. The DCR is fully rolled out globally at all points of sale already, and that, that's what led to Michael's comments in the opening there. NDC itself right now for us, is available in Canada. We'll roll out our three or four largest points of sale, including the U.S., before the end of this year. By the end of next year, we'll be substantially fully rolled out in our online points of sale globally. All of our GDS and agency agreements are global in nature for the footprint of those companies. That's helpful. If I might, just on the Aeroplan, I know if, you know, back in pre-pandemic, that I think the thought was lack of Aeroplan was a maybe a 3-point or so margin drag for, for Air Canada. Just how much of that is unlocked, and now that you have the plan in-house and then seeing the real value of it, just any kind of revised thoughts on if there's more to kind of margin contribution that you, that you would expect? For sure. We don't segment out Aeroplan's results and - results, excuse me, and its impact on our profitability. What I can say is the program has grown significantly from the point at which we took it over, and we're seeing that growth contribute, both top line and profitability. We, we just don't segment out the results of the business. All right, I tried. Thank you. Our next- Thank you. Our next question comes from Konark Gupta from Scotiabank. Please go ahead, your line is open. Thanks, operator. Good morning, everyone. Just wanted to get back to the CASM question. Is there any specific factor that has been most difficult to predict, you know, over the last six, seven months or so, that has kind of caused the guidance to kind of go up on the CASM side? Can you remind us if, if the CASM targets you laid out for 2023 and 2024 previously, do they reflect any potential implications of upcoming labor agreements? Yeah. Yeah, I, I'm gonna, I'm gonna call a friend on this one. maybe, Michael, in terms of just move this or a little bit, but, you know. Konark, good, good morning. It's Michael. You know, we've modified the guidance on, on, you know, partly because of capacity cuts, partly because of costs that are, are, are coming in place, some of which are revenue-based, costs, not all inflationary-based costs. We're obviously not going to disclose or talk about pilot agreements or what, what's in there or what's not in there, for, for, for any, any one of the pilot agreements that we're, we're talking about. You know, as John said, we're continuing to look at productivity. We had to staff up, you know, to ensure that we ran, as, as good a summer as possible. We've done that. We'll see that productivity gain come back to us over the next little while as we grow into it. A lot of different factors, but, you know, like I said in my comments and John said in his comments, this is a high, high focus area for us, and we'll continue to look at, at improvements in, in productivity using technology and other process improvements. Okay, no, that's that's great color. Thanks. Welcome, John, to Air Canada. Just one more question, quick on the balance sheet. I think you guys have done a decent progress on retiring some debt early on. Are there any more opportunities to, you know, utilize your excess cash sitting on the balance sheet? Obviously, free cash flow is kind of running ahead of your expectations so far. Any opportunity to kind of reduce further? Yeah. Thanks for the question. You know, definitely we will continue to be, you know, focused and active, and look for opportunities to take down debt, where, you know, where we see opportunities, where it makes economic sense, and there are still opportunities ahead for us to do that. You've, you've seen us be active over the last year between the convertible notes and the aircraft financing in the first and the second quarter. I think, you know, we'll continue to look at opportunities to deploy some of that cash against the more expensive debt. That's, that's, I think, par for the course. All right. Thanks for the time. Thank you. Our last question will come from Andrew Didora, from Bank of America. Please go ahead, your line is open. Hey, good morning, everyone. John, just on the, the fuel guide, you know, at first I was a little surprised you lowered it given the run up in crude prices, the, the hedge makes sense. I haven't gotten through all the disclosures, can you give us some color in terms of where you are hedged in 3Q on fuel? Then what have you assumed in your 108 full year guide in terms of hedge gains? I would say that the hedge we took in Q3 is the only assumption we've made. It was locked in when we made that assumption for the second half of the year. It's, you know, proving to be now quite favorable to the run rate on fuel today. I think that, you know, overall, you know, oil prices did run up a little bit in the last week or so. I would say that the 108 really reflects kind of the status quo on our on our prior guide, plus the hedge and the fact that Q2 was actually a little bit better and actually was a lift. That's kind of, I would say, the, the big picture, Matt. You know, I said it before, I'll just reiterate it again, we feel pretty good about our range. We, we feel good about all the components that come into that guide. Fuel is always gonna be a little bit of a, of a give and take, and it'll, it'll kind of drop where it drops. I'd say that we feel pretty comfortable that the, the guide range will protect against the, you know, any kind of, reassessment. Got it. One yeah, big picture question for Mike. You know, obvious earlier this week, I know China opened up some more group travel opportunities. You know, how are you thinking about the build back there? What, what needs to happen? You know, given your success in other markets, in the Pacific, do you think China will ever get back to where it was pre-pandemic? Thanks. Hi, it's Michael, Andrew, and I, I might turn some of this to Mark, who's very, very close to this, this file. Obviously, China is a very important market to us. I think we're flying there four times a week right now. Pre-pandemic, we were flying 35 times a week. We also now have the Russia overflight situation, so it's difficult to, to have flights from Eastern Canada, from Toronto, Montreal, primarily, to, to China, without using a Russia overflight. We are, w e'd like to see that market come back. It was a strong market for us pre-pandemic. Will it come back to 35 a week? Certainly not without the Russia overflight situation, being removed, and we have certainly no visibility on, on that situation. We hope it happens sooner than later, but certainly there, that market continues to be a strong market, and, we'll, we'll, we'll expand as we can into that market. Just to, just to piggyback a little bit here, our, our desire obviously is to, you know, get back to a daily frequency on Shanghai at some point and, you know, restore our service to Beijing. If we can do that from Vancouver, you know, over the medium term, you know, that, that would already be a major step. We have no further questions. I would like to turn the call back over to Valerie Durand for closing remarks. Once again, thank you very much for joining us this morning. Should you have any further questions, please do not hesitate to contact us at Investor Relations. Thank you. We wish you a lovely day. This concludes today's conference call. Thank you for your participation. You may now disconnect.