Wings Magazine

Air Canada’s battered brand starting to recover: Rovinescu

May 4, 2012, Montreal - Air Canada says bookings have started to recover after several job actions by unhappy workers prompted flight cancellations that had a "damaging rippling effect'' on consumer confidence.

May 4, 2012  By The Canadian Press

"Our brand is strong and resilient but we cannot take it for granted or our customers for granted, nor will we,'' CEO Calin Rovinescu said Friday after the airline reported deeper losses in the first quarter.

"Following this turbulent period we are focusing on achieving a climate of labour stability in restoring the confidence of our customers.''

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

The loss was 11 times higher this year than the $19 million loss in 2011 as the airline weathered higher fuel prices, work stoppages by some of its employees and the bankruptcy of Aveos, the company that formerly overhauled its planes.


Rovinescu said the airline expected labour issues to remain a major focus in the quarter, but said media reports about the labour disputes was "disproportionate to the actual disruption'' to its operations.

Air Canada will soon begin 10 days of scheduled negotiations with its pilots and machinists. If deals can't be reached, arbitrators will impose contracts within 90 days.

It is also launching requests for proposals to find cheaper heavy maintenance operators to replace the work done by Aveos before its closed and obtained creditor protection.

Rovinescu said Air Canada did as much as it possibly could to help its former aircraft overhaul subsidiary, which employed more than 2,600 workers.

"Our long-term contractual arrangements with Aveos should have allowed them to be profitable,'' he said, noting the airline wrote off $120 million in payments and commitments to Aveos in the quarter.

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

Fuel costs were $147 million, 20 per cent more than in the year-earlier period.

Air Canada had telegraphed its first-quarter results in a preliminary guidance last week. The loss, though  substantial, 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.

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.

Rovinescu described the results as "solid'' and said they can "be attributed to strong passenger demand and yield growth.''

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 said it 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.

On the Toronto Stock Exchange, Air Canada's shares were unchanged at 92 cents in morning trading Friday.


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