Air Canada Q1 Results: Labour Problems, Fuel Prices Take Toll On Airline

CP  |  Posted: 05/04/2012 8:35 am Updated: 05/04/2012 8:35 am

MONTREAL -- Air Canada's first-quarter loss was 11 times higher this year than in 2011 as the airline weathered higher fuel prices, work stoppages by some of its employees and the bankruptcy of the company that formerly overhauled its planes.

The Montreal company said Friday its net loss for the three months ended March 31 was $210 million, including $55 million attributed to discontinued operations at Aveos.

Air Canada's continuing operations also lost more, as they felt the impact of substantially higher fuel prices and labour disruptions. Its loss from continuing operations rose to $93 million from $66 million in the first quarter of 2011.

PHOTOS: A YEAR OF AIR CANADA'S LABOUR PROBLEMS

A year earlier, the total first-quarter loss was $19 million.

"The quarter was marked by a challenging environment, with persistently high fuel prices and volatility which resulted in a significant increase in fuel expense of $147 million, or 20 per cent, from the previous year's quarter,'' Calin Rovinescu, Air Canada president and chief executive officer, said in a statement.

"In addition, our operations were disrupted by job action by a number of unionized employees, which resulted in a decline in bookings for travel originating in Canada in the immediate aftermath of these incidents. Since then, we have seen an improvement in advance booking trends''

Although the loss was substantial, it wasn't as bad as analysts expected. The company also increased its revenue during the quarter and ended with bigger cash reserves than in the year-earlier.

The loss for the three month-period amounted to 76 cents per share, up from seven cents per share in the first quarter of 2011. Adjusted net loss was 64 cents per share, up from 45 cents per share a year earlier.

By both measures, Air Canada did better than consensus estimates compiled by Thomson Reuters. Analysts had expected, on the whole, a net loss of 77 cents per share and adjusted loss of 78 cents per share.

Despite its problems, cash reserves at Canada's largest airline were $135 million higher than a year earlier -- rising to $2.25 billion.

Air Canada reports it had a benefited from higher operating revenue, which rose to $2.96 billion in the quarter -- $209 million above the same time last year and slightly above the consensus estimate.

"In the first quarter, despite several challenges, Air Canada reported continued progress in a number of key areas,'' Rovinescu said.

"Revenue performance was strong, particularly in the premium cabin driven by traffic growth. We ended the quarter with $2.25 billion in cash and cash equivalents representing an increase of $135 million from the previous year. We improved our balance sheet by reducing adjusted net debt by more than $200 million in the quarter.''

He also noted that the company is undergoing negotiations with the last two major unions without new contracts. The contentious labour situation has been an ongoing issue for months, causing some observers to question whether Air Canada is losing business to rivals because of the uncertainty for travellers.

"We are focused on maintaining the confidence of our customers and on continuing to work with all stakeholders to ensure Air Canada is competitively positioned for sustainable, long term growth,'' Rovinescu said Friday.

A YEAR OF AIR CANADA'S LABOUR PROBLEMS