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Air Canada’s Q1 losses deeper than expected

April 22, 2013, Montreal - Air Canada said its losses in the first quarter were deeper than industry observers expected, in part due to the cost of a stormy winter.


April 22, 2013
By The Canadian Press

In preliminary results released Monday, the country's largest airline said it expects to lose $260 million, compared with a loss
of $274 million a year earlier.

The loss adjusted for one-time items was $143 million compared with a loss of $162 million in the first quarter of 2012.

But analysts had expected Air Canada's adjusted loss would be $120.4 million or 40 cents per share on $3 billion of revenues,
according to those polled by Thomson Reuters.

The Montreal-based airline said it issued the preliminary report ahead of the full results on May 3 to comply with disclosure rules as it explores a range of debt financing options.

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It didn't disclose what financing options are being considered.

An industry analyst said Air Canada would likely be the first Canadian airline to tap into a new way to finance aircraft purchases that reduces interest rates.

Chris Murray of PI Financial Corp. wrote last week that Ottawa's approval in December of an aircraft protocol opens the doors to the "enhanced equipment trust certificate'' (EETC) market that has been used by U.S. carriers for nearly 20 years.

He pointed to reports suggesting the airline will arrange a $600 million EETC transaction for six new Boeing 777 aircraft. Murray added Air Canada may also consider this financing for its new Boeing 787 planes set to begin delivery next year.

As of the end of March, Air Canada estimates it had $3.987 billion of adjusted net debt – $246 million less than a year
earlier.

The adjusted net debt includes Air Canada's lease obligations as well as long-term debt, reduced by the value of its cash, cash
equivalents and short-term investments.

Air Canada said the most recent quarter included a $10-million hit due to flight cancellations and delays caused by severe weather conditions.

It also had a higher proportion of leisure passengers than business travellers in part due to an earlier Easter holiday.

The airline recorded a $24-million accounting item related to the impaired value of Airbus A340-300 passenger jets.

In its revised outlook, Air Canada said it expects its adjusted costs per available seat mile to improve more this year than
previously anticipated, based on better than expected performance in the first quarter.

The airline's adjusted CASM increased 1.4 per cent compared with the first quarter of 2012 rather than an anticipated increase of between three and four per cent.

As a result, Air Canada now said it now expects 2013 full-year adjusted CASM to fall by 0.5 to 1.5 per cent from last year – an increase of half a percentage point at both ends of the scale.

The airline said its operating loss for the first quarter will be about $106 million, compared with $91 million a year ago, while
EBITDAR (earnings before interest, taxes, depreciation, amortization and aircraft rental) will be down $20 million to $145 million.

The airline maintained its prior forecasts for domestic and system-wide capacity growth in 2013. It expects available seat miles will increase by 1.5 to 2.5 per cent across its network, while domestic capacity will grow 0.5 to 1.5 per cent.