Business travel improving for Air Canada

MONTREAL - Air Canada continued to enjoy a gradual improvement in passenger revenues and operating income in the second quarter as a strengthening economy propelled a recovery in business travel.

MONTREAL - Air Canada continued to enjoy a gradual improvement in passenger revenues and operating income in the second quarter as a strengthening economy propelled a recovery in business travel.

Canada's largest airline said Thursday its passenger revenues increased 12 per cent to $256 million, with about half coming from the key premium business and executive class category.

Premium cabin revenues increased 24.1 per cent, but still remained 2.9 per cent below 2008 levels.

"Our financial performance in the quarter clearly shows that the economy is stabilizing and that we're making progress in both maximizing our revenues and lowering our costs," president and CEO Calin Rovinescu said Thursday during a conference call.

While there remains much work to do, Air Canada (TSX:AC.B) has over the last 15 months rebuilt an "adequate liquidity", achieved strong revenue management, better cost control and expanded its international network, he added.

The airline reported a loss of $203 million, or 72 cents per share for the quarter ended June 30 compared with a profit of $155 million, or $1.55 per share, in the second quarter last year.

The results included a $156-million foreign-exchange loss and a $54-million charge related to its secured term credit facility.

Air Canada said it earned $75 million in operating income during the quarter, a $188-million improvement from the $113-million operating loss a year ago.

Operating revenues increased to $2.63 billion from $2.33 billion.

The results were in line with its guidance issued July 20 when the airline announced a private offering to raise $1.1 billion. About $729 million of the proceeds were used to repay a credit facility provided by groups including Aeroplan (TSX:AER) and ACE Aviation Holdings (TSX:ACE.B).

Air Canada's parent company, ACE, which owns 27 per cent of the airline, said on Thursday that it recorded a consolidated loss of $50 million for the quarter. This includes its share of Air Canada's losses and $5-million interest income from its loan to the airline.

As of June 30, Air Canada's cash, cash equivalents and short-term investments amounted to $1.815 billion.

For July, Air Canada also reported a record system load factor or percentage of seats filled of 84.9 per cent on a consolidated basis with Jazz.

That compared with 83.6 per cent in July 2009, an increase of 1.3 percentage points. System traffic increased 10.8 per cent — an increase of 9.1 per cent.

Asian and European markets in which the airline added capacity performed well with Pacific routes logging a 37 per cent increase in revenue over the same time last year.

"Much of this international traffic growth can be attributed to our added focus on capturing connecting traffic at our Toronto and other Canadian hubs," Rovinescu added.

Air Canada said it was on target to find $300 million in savings or new revenue by the end of the year and raised its guidance for 2011.

The airline said it now expects to find a total of $530 million in savings or new revenue by the end of 2011, up from earlier guidance of $500 million, due mainly to higher fees for upgrades and seat selections.

Air Canada also said it lost about $20 million in operating profits from flight cancellations after the closure of European airspace in mid-April because of volcanic ash from the volcanic eruption in Iceland.

Cameron Doerksen of Versant Partners said Air Canada's is poised to improving results in upcoming quarters, especially the seasonally strong third quarter, which should drive its shares higher.



On the Toronto Stock Exchange, Air Canada's shares fell eight cents, or 3.48 per cent, to $2.22 in afternoon trading.

 
 
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