ATW Daily News

Foreign exchange gains push Air Canada to C$277 million profit

Monday November 9, 2009

Air Canada reported third-quarter net income of C$277 million ($260.2 million), reversed from a net loss of C$132 million in the prior-year period, noting that it was helped significantly by a C$295 million foreign exchange gain that compared to an C$87 million loss last year.

President and CEO Calin Rovinescu told analysts and reporters Friday that it would be "another 12-18 months" before AC expects to see a full recovery to pre-recession revenue levels, explaining that the carrier's rebound may lag general economic recovery since it will rely on businesses to regain enough confidence to once again purchase premium tickets at standard fares. Third-quarter premium revenue was down 16% "entirely due to lower yield, as traffic in premium cabins grew" more than 5%, CFO Michael Rousseau pointed out.

"The worst of the worst seems to be behind us," Rovinescu said. "Sprouts of green are coming up from the earth. However, we're [heavily] reliant on the premium traveler and that will come back more slowly." He added that AC is in far better shape than it was earlier in the year owing to C$1.25 billion in new liquidity, much of it finalized during the third quarter. It had a cash balance of C$1.5 billion as of Oct. 31.

He said he is continuing to push for "cultural change" at AC, pressing employees to adopt a "just-do-it mentality" and for the company to become "more entrepreneurial" so that it can react "nimbly" to evolving market conditions. He noted that AC is pressing forward on a "cost transformation program" that aims to slash C$500 million in annual costs by 2011, with C$175 million in cuts already achieved.

The carrier said it expects full-year 2009 system capacity to decline 4.25%-4.75%, a slight revision from previous estimates of a 4.5%-5.5% cut. It declined to project 2010 capacity.

Third-quarter revenue dropped 13.3% to C$2.67 billion while expenses lowered 12.2% to C$2.6 billion, producing operating income of C$68 million, down 39.3% from C$112 million last year. Traffic decreased 2.1% to 14.15 billion RPMs on a 3.3% dip in capacity to 16.95 billion ASMs, producing a load factor of 83.5%, up 1 point. Passenger yield fell 11.2% to C16.9 cents as PRASM lowered 10.2% to C14.1 cents and CASM slid 9.2% to C15.4 cents. CASM excluding fuel rose 4.5% to C11.3 cents.

by Aaron Karp

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