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Fuel costs push Air Canada into loss

May 11, 2017 Headline News No Comments Email Email

Air Canada has pointed out that the first quarter is traditionally one of its weakest after sliding into the red in first quarter 2017, posting a net loss of CAD 37 million (AUD 36.7 million).

The loss compared to a net profit of CAD 101 million in the same period last year. Fuel costs rose by 48% in the interim.

“As the first quarter is traditionally one of our weakest, I am pleased to see system traffic up 14% and revenues up 8.9% year-over-year, while adjusted CASM [costs per available seat miles] is down 6%, signalling ongoing progress in implementing our long-term strategic plan,” said Calin Rovinescu, the airline’s president and chief executive.

“We have a positive outlook on the year as we see improvements in the domestic Canada, US transborder and markets, with the Pacific market stabilising towards the second half of the year.  We also remain on track to meet the targets of our key financial measures and continue to expect positive free cash flow in the range of CAD 200 million to CAD500 million in 2017.”

Rovinescu said this year represented the third year of planned significant capacity growth as Air Canada expanded internationally with the introduction of its new wide-body fleet “and the continued successful deployment of Rouge to compete effectively in leisure markets”.  Rouge is the airline’s holiday and leisure subsidiary, an arrangement similar to Qantas and Jetstar.

“In the first quarter, we made a significant investment with the inauguration of our Boeing 787 Dreamliner daily service from Montreal to Shanghai, our first direct flight from that city to Asia,” Rovinescu said.

“This week we announced our first direct flights to South America from Montreal with the introduction of Rouge service to Lima, and the expansion of Pacific services between Vancouver and Melbourne, both starting next winter.  Other new international and US transborder services announced during the quarter include Montreal-Tel Aviv, Montreal and Toronto-Reykjavik, Iceland and Vancouver-Boston.

“Capacity growth, driven by our wide-body fleet expansion, will begin to slow in 2018 as we shift our focus to our mainline narrow-body fleet replacement program starting with the introduction of the Boeing 737 MAX aircraft later this year, followed by the Bombardier C-Series aircraft in late 2019.”

Revenue for first quarter grew 9% over the previous year at CAD 3.64 billion but expenses outpaced it, growing 15.9% to CAD 3.7 billion. The operating loss was CAD 54 million, from a CAD 154 million operating profit in 1Q16.

Written by Peter Needham

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