AC - Net Loss $288 Million- 1st Quarter

[Kip Powick]

MONTREAL — Air Canada has reported a first-quarter net loss of $288-million compared with a loss of $34-million in the first three months of last year. The latest loss included a $125-million provision for cargo price-fixing investigations and $89-million in currency-related setbacks.

The airline said Thursday its operating loss in the seasonally slow January-March quarter was $12-million, improving on a year-ago operating loss of $78-million.

Air Canada noted that because it no longer includes the Jazz regional operations in its consolidated accounting, the latest results are not directly comparable with a year ago.

Passenger revenue increased eight per cent to $2.3-billion, and Air Canada's cost per seat was unchanged from a year ago despite a $130-million increase in fuel expenses.

The suppression of other spending was attributed to the stronger Canadian dollar, economical new airliners, “and various cost reduction programs.”

“Our revenue model delivered solid unit revenue growth, and contributed to a 4.8 per cent improvement in our unit costs in the quarter, excluding fuel,” stated Air Canada CEO Montie Brewer.

“During the quarter, we successfully introduced a number of fare increases which the market has absorbed,” he added.

“Advance bookings remain strong, reflecting the growing Canadian economy and strong currency. However, the increase in fuel prices over the past several months has been unprecedented and the acceleration of these increases combined with price volatility presents an increasingly difficult challenge.”

The cargo-investigation provision arises from probes by competition authorities in the United States, Canada and Europe into alleged anti-competitive pricing by a number of airlines and cargo carriers. Air Canada has also been named in U.S. and Canadian class action lawsuits. The $125-million provision “does not address the proceedings in all jurisdictions, but only where there is sufficient information to do so,” the airline said.

On a per-share basis, the quarterly net loss was 62 cents, compared with 57 cents a year ago.

[dagger]

MONTREAL — Air Canada has reported a first-quarter net loss of $288-million compared with a loss of $34-million in the first three months of last year. The latest loss included a $125-million provision for cargo price-fixing investigations and $89-million in currency-related setbacks.

The airline said Thursday its operating loss in the seasonally slow January-March quarter was $12-million, improving on a year-ago operating loss of $78-million.

Air Canada noted that because it no longer includes the Jazz regional operations in its consolidated accounting, the latest results are not directly comparable with a year ago.

Passenger revenue increased eight per cent to $2.3-billion, and Air Canada's cost per seat was unchanged from a year ago despite a $130-million increase in fuel expenses.

The suppression of other spending was attributed to the stronger Canadian dollar, economical new airliners, “and various cost reduction programs.”

“Our revenue model delivered solid unit revenue growth, and contributed to a 4.8 per cent improvement in our unit costs in the quarter, excluding fuel,” stated Air Canada CEO Montie Brewer.

“During the quarter, we successfully introduced a number of fare increases which the market has absorbed,” he added.

“Advance bookings remain strong, reflecting the growing Canadian economy and strong currency. However, the increase in fuel prices over the past several months has been unprecedented and the acceleration of these increases combined with price volatility presents an increasingly difficult challenge.”

The cargo-investigation provision arises from probes by competition authorities in the United States, Canada and Europe into alleged anti-competitive pricing by a number of airlines and cargo carriers. Air Canada has also been named in U.S. and Canadian class action lawsuits. The $125-million provision “does not address the proceedings in all jurisdictions, but only where there is sufficient information to do so,” the airline said.

On a per-share basis, the quarterly net loss was 62 cents, compared with 57 cents a year ago.

Two year delay of first 787 deliveries. Now beginning Jan 2012.

AC to seek compensation from Boeing.

[CanadaEH]

AC to seek compensation from Boeing.

They might need it if fuel keeps going up.

[dagger]

They might need it if fuel keeps going up.

Well, better out of Boeing's pocket.

[dozerboy]

Standby for further route suspensions...

YYZ-BOG

YYZ-LIM

YVR-OGG

all served with the 767-200's.

[Specs]

The latest loss included a $125-million provision for cargo price-fixing investigations .......

The cargo-investigation provision arises from probes by competition authorities in the United States, Canada and Europe into alleged anti-competitive pricing by a number of airlines and cargo carriers. Air Canada has also been named in U.S. and Canadian class action lawsuits. The $125-million provision “does not address the proceedings in all jurisdictions, but only where there is sufficient information to do so,” the airline said.

That went right over my head.

I know BA and some others were fined for for collusion on price fixing but I didn't know AC was involved. It says "investigations" - it cost us that much just to put paperwork together and have a few lawyers attend hearings?

Could somebody explain that one?

[E-HANDLE]

Did AC not sell and lease back some 777s in Q1?

Any financial wizz on the board know how it was accounted for?

[Rookie]

What is the difference between Operating Loss and Net Loss and which is the more significant number?

[SkyBlazer]

Rookie....

Operating Loss - is what the airline lost actually flying the planes with people in them around and all the costs associated to strictly that -

Net Loss - is the overall loss of the company as it exists including all other assoc costs ie lawsuits assett management etc write offs etc...

While the operating loss was only 12mil the simple fact of the matter is the total loss was much much greater.

In the future there wont be worry about the airlines operating costs unless they can manage the Net loss.

SB

[dagger]

Rookie....

Operating Loss - is what the airline lost actually flying the planes with people in them around and all the costs associated to strictly that -

Net Loss - is the overall loss of the company as it exists including all other assoc costs ie lawsuits assett management etc write offs etc...

While the operating loss was only 12mil the simple fact of the matter is the total loss was much much greater.

In the future there wont be worry about the airlines operating costs unless they can manage the Net loss.

SB

That would be true if net loss reflects only recurrent rather than one-time issues. However, if net costs include a lot of one-time items, even non-cash items, you would be well to focus on operating profit/loss plus recurring non-operating cash items, like interest on debt. That would give a truer picture of a carrier's ability to manage its future.

[dagger]

Standby for further route suspensions...

YYZ-BOG

YYZ-LIM

YVR-OGG

all served with the 767-200's.

Nope, not yet anyway.

Axing Osaka and Rome for the winter is meant to free up capacity for those routes. Four 767-200s are being retired earlier than planned. Also, in the case of Bogota, it has been flown with an A319 before and could be again.

[dozerboy]

...we will see, we will see.

[DEFCON]

" Air Canada has reported a first-quarter net loss of $288-million"

Now, if only AC could get those pesky employee's to work for free. I guess we'll have to wait for the next bankruptcy event for that to happen?

[Fido]

The $12 million operating result is a great feat. It was not more than 10 years ago that AC had a goal to get the Q1 operating loss under $100 million.

[dagger]

The $12 million operating result is a great feat. It was not more than 10 years ago that AC had a goal to get the Q1 operating loss under $100 million.

Analysts' reaction has been very positive. They also like that AC is able to find more and more ways to trim costs. I know this bugs some employees, but the cutting isn't coming off wages except to the extent that new hires are coming in at the bottom of scale. I believe AC's ex-fuel CASM rose by half of the rate of capacity increase.

[dozerboy]

There will be a pilot reduction bid coming out any day now...whether it translates to layoffs is anyone's guess. Standby for more route reductions.

[Johnny]

Layoffs?

Can't see it myself.

The word I hear is, Boeing is offering up 777's or 767-300's to mitigate the 787 delays.

[dagger]

Layoffs?

Can't see it myself.

Nor I. Sure, the economy might get worse, not better, oil prices may go to $200 tomorrow morning, and plans for the winter will change. But right now, this isn't the most likely scenario.

[FA@AC]

Nope, not yet anyway.

Axing Osaka and Rome for the winter is meant to free up capacity for those routes. Four 767-200s are being retired earlier than planned. Also, in the case of Bogota, it has been flown with an A319 before and could be again.

BOG and LIM operate with good loads in Y. J is rarely full on BOG, but I get the impression that yields in Y are fairly high to both BOG and LIM.

[Fido]

.... I believe AC's ex-fuel CASM rose by half of the rate of capacity increase.

Not quite, it was better than that.

The ex-fuel CASM dropped. I think that what you heard was that total costs rose at half the rate of the capacity increase.

[LongTimer V]

I haven't heard of any cargo SUITS getting fired over this $125 million charge

or did they get promoted.

You would think that someone somewhere would be held accountable for this,or did they get promoted

thats the air canada way

must be near contract time,get rid of as much money ,as fast as you can so you can cry poor

[deicer]

You would think that someone somewhere would be held accountable for this,or did they get promoted

thats the air canada way

must be near contract time,get rid of as much money ,as fast as you can so you can cry poor

You hit the nail on the head.

Make the books look bad, pass out compensation statements to pressure the employees into believing they're overpaid,,,,

It's gonna be nasty over the next 14 months or so

Iceman

[Homerun]

The $125 million is a provision in case AC loses. If they don't lose it will be reveresed on future statements.

[deicer]

The $125 million is a provision in case AC loses.  If they don't lose it will be reveresed on future statements.

Will it, and when? Post 2009? And with the open ended nature of the statement, this also looks like a barrel that they can pour more into if neccessary.

Iceman