ATW Daily News

Air Canada posts C$400 million loss, seeks 'immediate' pension relief

Monday May 11, 2009

Air Canada reported a first-quarter net loss of C$400 million ($342 million), widened 38.9% from a C$288 million loss in the year ago period, and new President and CEO Calin Rovinescu said the carrier is urgently seeking relief from its pension funding obligations.

On the job for five weeks and already receiving criticism from AC's unions (ATWOnline, April 2), Rovinescu told shareholders at the company's AGM in Montreal, available via webcast, that it has a "pressing need to achieve an alternate pension funding solution" (ATWOnline, May 6). He noted that AC has around 25,000 employees and 25,000 retirees and has made C$1.7 billion in pension payments since 2004. It has a C$2.9 billion pension funding solvency deficit and has asked unions for a funding "moratorium."

He said Ottawa "realizes there is a problem" and is undertaking a review of Canada's strict pension laws. But changes likely won't come until late this year at the earliest and "in the interim we require more immediate action," he insisted.

Rovinescu also told shareholders that "liquidity will continue to be a prime concern" and said AC is actively seeking new sources of financing. It currently has C$1.1 billion cash on hand but wants to build a cash reserve "closer to 15% of revenue." Based on 2008 revenue of C$11.08 billion, it is aiming to boost liquidity to around C$1.7 billion.

Rovinescu suggested that the carrier had gone too far in imposing fees that are not "customer friendly." Since his ascension, for example, it has rescinded call center booking fees and instituted a "low fare guarantee" for booking domestic and transborder tickets on its website. It will provide a C$50 travel credit plus the fare difference if a customer finds a cheaper fare in the same class for the given AC flight through another outlet within 24 hr. of purchasing. "Expect many more" such initiatives, he said.

First-quarter revenue fell 12.5% to C$2.39 billion while expenses lowered 5.8% to C$2.58 billion, producing an operating loss of C$188 million, significantly widened from a C$12 million operating loss last year. Traffic decreased 10.9% to 10.98 billion RPMs on a 10.3% cut in capacity to 13.82 billion ASMs, producing a load factor of 79.5%, down 0.5 point.

Passenger yield dropped 2.3% to C18.2 cents as RASM dipped 2.3% to C17.3 cents and CASM heightened 5% to C18.7 cents. CASM ex-fuel rose 9.4% to C14.4 cents.

by Aaron Karp

Other headlines: