Air Canada Thursday said tough winter weather and a weaker
Canadian dollar pushed it deeper into the red in the first quarter,
and said it has decided to refurbish part of its fleet rather than
acquire new planes.
The Montreal-based carrier, Canada's biggest airline by traffic,
called the quarter "somewhat difficult," but said it made progress
on cost-cutting initiatives.
The airline gave an update on its fleet-renewal plans, including
a decision to retain and refurbish 25 Embraer S.A. narrowbody
aircraft instead of replacing them. Air Canada has been looking at
options for upgrading its fleet as it seeks to lower operating
expenses and compete more effectively against rivals on
international routes.
The decision to retain the Embraer planes was a potential blow
to plane maker Bombardier Inc., which would have competed with the
likes of Boeing Co. and Airbus Group for the business. The market
believed Bombardier had "a good chance" of winning the potential
order since it and Air Canada are both Canadian companies, said
Canaccord Genuity analyst David Tyerman. An order from a quality
carrier such as Air Canada would also have underscored the strength
of Bombardier's CSeries small passenger jet program, he said.
Air Canada indicated capital-spending priorities drove its
decision to keep the 25 Embraer jets.
"After careful consideration, Air Canada has decided to continue
to operate the aircraft given their young age, productivity and
high customer acceptance on existing routes and to avoid additional
capital expenditures and debt," the airline said in a
statement.
Air Canada also said it plans to convert 12 Boeing 777-300ER and
six Boeing 777-200LR aircraft into "a more competitive
configuration," adding a premium economy cabin and refurbishing the
business class cabin.
Air Canada announced plans in December to buy 61 new Boeing 737
Max aircraft to replace its aging fleet of Airbus single-aisle
jets. As part of that deal, Boeing agreed to purchase 20 of the 45
Embraer narrowbody jets Air Canada operates, replacing them with
larger narrowbody aircraft.
Air Canada lost 341 million Canadian dollars (US$313 million),
or C$1.20 a share, in its latest quarter, compared with a loss of
C$260 million, or 95 Canadian cents, a year earlier.
Adjusted to exclude items such as foreign-exchange losses, the
airline's loss narrowed to 46 Canadian cents a share from 52
Canadian cents. The Thomson Reuters mean estimate was for a loss of
45 Canadian cents a share.
EBITDAR, or earnings before interest, taxes, depreciation,
amortization, impairment and aircraft rent, was C$147 million,
compared with C$145 million a year earlier. In April, the airline
projected first-quarter EBITDAR would be in line with the
year-earlier level.
Air Canada said operating expenses increased 2% to C$3.13
billion, partly because of a weaker Canadian dollar.
Revenue rose 3.8% to C$3.07 billion. Analysts were expecting
C$3.05 billion.
Air Canada's adjusted cost per available seat mile, or CASM,
fell 2.5% from a year earlier, in line with its most recent
projection for a decline of 2% to 2.5%. For the second quarter, it
expects adjusted CASM to decline in the range of 3.5% to 4.5%. It
also said it expects a strong summer travel season.
Write to Judy McKinnon at judy.mckinnon@wsj.com and Ben Dummett
at ben.dummett@wsj.com
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