Air Canada Reports Third Quarter 2012 Results

Third Quarter 2012 EBITDAR of $554 million ($678 million including benefit 
plan amendments)
Cash and short-term investments of $2.196 billion at September 30, 2012 
MONTREAL, Nov. 8, 2012 /CNW Telbec/ - Air Canada reported earnings before 
interest, taxes, depreciation, amortization and impairment, and aircraft rent 
(EBITDAR), before the impact of certain benefit plan amendments, of $554 
million in the third quarter of 2012 compared to EBITDAR of $535 million in 
the third quarter of 2011, an increase of $19 million. Including the 
favourable impact of benefit plan amendments, EBITDAR was $678 million for the 
third quarter of 2012. Adjusted net income ((1)) of $230 million increased $37 
million from the third quarter of 2011. Adjusted net income per diluted share 
((1) )was $0.82 in the third quarter of 2012 compared to adjusted net income 
per diluted share of $0.68 in the same quarter in 2011. On a GAAP basis, Air 
Canada reported net income of $429 million or $1.54 per diluted share for the 
third quarter of 2012 compared to a net loss of $124 million or $0.45 per 
diluted share for the same period last year. This improvement in net income 
was driven in large part by favourable foreign exchange gains 
quarter-over-quarter. 
"I am extremely pleased with Air Canada's strong financial performance in the 
third quarter especially given the economic environment we are operating in," 
said Calin Rovinescu, President and Chief Executive Officer. "We recorded 
EBITDAR of $554 million, or $678 million including benefit plan amendments, 
and adjusted net income of $230 million. We achieved passenger revenue 
growth of 3.1 per cent from both yield improvement and traffic growth. Our 
disciplined approach to capacity management allowed us to produce a record 
load factor of 86.3 per cent in the quarter. Our Pacific performance 
continued to be particularly strong with a revenue increase of 13.9 per cent 
year-over-year. 
"Moreover, in the first nine months of 2012, consistent with our priority of 
improving our balance sheet, adjusted net debt was reduced by $308 million, 
and our cash levels remained strong at approximately $2.2 billion. 
"We continued to focus on pursuing international growth opportunities and on 
the ongoing transformation of our cost structure. In addition, we have 
announced a number of planned fleet realignment initiatives: the transfer of 
15 regional Embraer 175 aircraft to one of our Air Canada Express operators, 
Sky Regional Airlines, subject to certain conditions; the deployment of new 
Bombardier Q400s by another of our Air Canada Express operators, Jazz, on key 
Western Canada markets; and the introduction of two new Boeing 777 aircraft in 
the mainline fleet next year. 
"We are forming an integrated leisure group by combining the activities of our 
tour operator business with our new leisure airline. Our commercial team is 
currently focused on the 2013 launch of the leisure carrier and we look 
forward to providing further details in the coming weeks. Another recent 
positive development is the agreement reached with Canada's Commissioner of 
Competition that will allow us to finalize and implement a Canada-U.S. 
transborder joint venture with United Airlines, our longstanding alliance 
partner, in this important aviation market. 
"These initiatives, combined with our on-going focus on cost transformation, 
are aimed at ensuring Air Canada's global competitiveness and long-term 
success. 
"For the third consecutive year, Air Canada has been named as the Best 
International Airline in North America in Skytrax's industry benchmark survey 
of international air travelers. I thank our employees for their ongoing 
commitment to excellence and share their pride in this great honour during the 
airline's 75(th) anniversary year," concluded Mr. Rovinescu. 
Air Canada has entered into discussions with the federal government with 
respect to an extension of pension deficit funding relief given that the Air 
Canada special funding regulations expire in January 2014. Air Canada's 
Canadian-based unions support the extension request. This is in addition to 
various changes to Air Canada's pension plans that were made during the last 
round of labour negotiations, which remain subject to regulatory approval. 
Income Statement Highlights 
System passenger revenues increased $92 million or 3.1 per cent, on a 1.6 per 
cent improvement in yield and a 0.8 per cent growth in traffic. Passenger 
revenue per available seat mile (RASM) increased 2.2 per cent from the third 
quarter of 2011 due to the yield increase and a 0.5 percentage point 
improvement in passenger load factor. 
Excluding the impact of certain benefit plan amendments described below, fuel 
expense and the cost of ground packages at Air Canada Vacations, CASM 
increased 1.6 per cent from the third quarter of 2011. This 1.6 per cent CASM 
increase was in line with the 1.0 per cent to 2.0 per cent third quarter 
increase projected in Air Canada's news release dated August 8, 2012. 
In the third quarter of 2012, operating expenses decreased $65 million or 2 
per cent from the corresponding quarter in 2011.  Included in operating 
expenses in the third quarter of 2012 was an expense reduction of $124 million 
related to changes made to the terms of the new collective agreement with 
pilots pertaining to retirement age. This reduction is reflected under 
"Benefit plan amendments" on Air Canada's consolidated statement of 
operations. 
In the quarter, operating income of $421 million, which included the 
favourable impact of the benefit plan amendments, increased $151 million from 
the third quarter of 2011. 
Liquidity Highlights 
At September 30, 2012, Air Canada's cash and short-term investments amounted 
to $2,196 million, $17 million higher than Air Canada's cash and short-term 
investments balance at September 30, 2011, and represented 18 per cent of 
12-month trailing operating revenues 
At September 30, 2012, adjusted net debt of $4,268 million decreased $308 
million from December 31, 2011, reflecting the impact of net debt repayments, 
as well as the favourable impact of a stronger Canadian dollar. 
Current Outlook 
In the fourth quarter of 2012, Air Canada expects its system ASM capacity, as 
measured by available seat miles (ASMs), to increase in the range of 0 to 1.0 
per cent when compared to the fourth quarter of 2011. 
Taking into account reported ASM capacity for the first nine months of 2012, 
Air Canada now expects its full year 2012 system capacity to increase in the 
range of 0.75 to 1.25 per cent when compared to the full year 2011 (as opposed 
to the 0.5 to 1.5 per cent ASM increase projected in Air Canada's news release 
dated August 8, 2012) and expects its full year 2012 domestic capacity to 
increase in the range of 0.5 to 1.0 per cent from the full year 2011 (as 
opposed to the 0.5 to 1.5 per cent ASM increase projected in Air Canada's news 
release dated August 8, 2012). 
For the fourth quarter of 2012, Air Canada expects adjusted CASM ((1)) to 
decrease by 2.0 to 3.0 per cent as compared to the fourth quarter of 2011. 
Taking into account reported operating expense results for the first nine 
months of 2012, Air Canada now expects adjusted CASM for the full year 2012 to 
increase by 0.75 to 1.25 per cent from the full year 2011 level (as opposed to 
the 0.5 to 1.5 per cent increase projected in Air Canada's news release dated 
August 8, 2012). 
In addition, Air Canada plans to increase its full year 2013 system capacity 
by 1.5 to 3.0 per cent when compared to the full year 2012. This projection 
includes all carriers operating under the Air Canada Express banner and the 
expected impacts of the new leisure group and the two Boeing 777 aircraft 
scheduled for delivery in June and August 2013. 
Air Canada's above-mentioned outlook assumes Canadian GDP growth ofbetween 
1.5 to2.0 per cent for 2012 and 2013. In addition, Air Canada expects that 
the Canadian dollar will trade, on average, at C$0.99per U.S. dollar in the 
fourth quarter of 2012 and C$1.00 per U.S. dollar for the full year 2012 and 
that the price of jet fuel will average88cents per litre in the fourth 
quarter of 2012 and 89 cents per litre for the full year 2012. 
The following table summarizes Air Canada's above-mentioned outlook for the 
fourth quarter of 2012 and for the full year 2012 and related major 
assumptions: 


                                                 
                          Fourth Quarter 2012  
                                       versus     Full Year 2012 versus
                          Fourth Quarter 2011            Full Year 2011

Current Outlook                                                        
                                                 

Available seat miles                           
(System)                  Increase 0% to 1.0%   Increase 0.75% to 1.25%
                                                 

Available seat miles                           
(Canada)                                  n/a     Increase 0.5% to 1.0%
                                                 

Adjusted CASM ((1))     Decrease 2.0% to 3.0%   Increase 0.75% to 1.25%
                                                 
                                                                       
                          Major Assumptions -       Major Assumptions -
                          Fourth Quarter 2012            Full Year 2012

Major Assumptions                                                      
                                                 

Canadian dollar per                            
U.S. dollar                              0.99                      1.00
                                                 

Jet fuel price - CAD                           
cents per litre (net of
fuel hedging)                        88 cents                  89 cents
                                                 
                              2012 annualized  
                                     Canadian


                    GDP growth of 1.5% to              Canadian GDP
Canadian economy                         2.0%    growth of 1.5% to 2.0% 


    For the full year 2012, Air Canada also projects the following:
    --  Depreciation, amortization and impairment expense to decrease
        by $50 million from the full year 2011 (as opposed to the
        decrease of $55 million projected in Air Canada's new release
        dated August 8, 2012).  This revised guidance takes into
        account actual expenses recorded in the first nine months of
        2012.
    --  Employee benefits expense to increase by $30 million from the
        full year 2011.

The following table summarizes the above-mentioned projections for the full 
year 2012:
                                                                 
                                            Full Year 2012 versus
                                                   Full Year 2011

Depreciation, amortization and impairment  
expense                                      Decrease $50 million

Employee benefits expense                    Increase $30 million
    The following table summarizes Air Canada's outlook for the full year 2013:
                                                      
                                 Full Year 2013 versus
                                        Full Year 2012

Current Outlook                                       

Available seat miles (System)    Increase 1.5% to 3.0%

Major Assumptions                                     


                                      Canadian GDP
Canadian economy                growth of 1.5% to 2.0% 
The outlook provided constitutes forward-looking statements within the meaning 
of applicable securities laws and is based on a number of additional 
assumptions and subject to a number of risks. Please see section below 
entitled "Caution Regarding Forward-Looking Information." 
(1)Non-GAAP Measures 
Below is a description of certain non-GAAP measures used by Air Canada to 
provide additional information on its financial and operating performance. 
Such measures are not recognized measures for financial statement presentation 
under Canadian GAAP and do not have standardized meanings and may not be 
comparable to similar measures presented by other public companies. Readers 
should refer to Air Canada's Third Quarter 2012 MD&A for a reconciliation of 
non-GAAP financial measures. 


    --  Adjusted net income (loss) and adjusted net income (loss) per
        diluted share are used by Air Canada to assess share
        performance without the effects of foreign exchange, net
        financing income (expense) on employee benefits, mark-to-market
        adjustments on derivatives and other financial instruments
        recorded at fair value and unusual items.
    --  EBITDAR is commonly used in the airline industry and is used by
        Air Canada to assess earnings before interest, taxes,
        depreciation, amortization and impairment, and aircraft rent,
        as these costs can vary significantly among airlines due to
        differences in the way airlines finance their aircraft and
        other assets.
    --  Adjusted CASM is used by Air Canada to assess the operating
        performance of its ongoing airline business without the effects
        of fuel expense, the cost of ground packages at Air Canada
        Vacations and unusual items as such expenses may distort the
        analysis of certain business trends and render comparative
        analyses to other airlines less meaningful.
    --  Free cash flow is used by Air Canada as an indicator of the
        financial strength and performance of its business because it
        shows how much cash is available for such purposes as repaying
        debt, meeting ongoing financial obligations and reinvesting in
        Air Canada.
    --  Adjusted net debt is a key component of the capital managed by
        Air Canada and provides a measure of the airline's net
        indebtedness.

Air Canada's Third Quarter 2012 Unaudited Interim Condensed Consolidated 
Financial Statements and Notes and its Third Quarter 2012 Management's 
Discussion and Analysis (MD&A) are available on Air Canada's website at 
aircanada.com, and will be filed on SEDAR at www.sedar.com.

For further information on Air Canada's public disclosure file, including Air 
Canada's Annual Information Form dated March 29, 2012, consult SEDAR at 
www.sedar.com.

Analyst Conference Call Advisory

Air Canada will host its quarterly analysts' call today, November 8, 2012 at 
09:00 ET. Calin Rovinescu, President and Chief Executive Officer, Michael 
Rousseau, Executive Vice President and Chief Financial Officer, Ben Smith, 
Executive Vice President and Chief Commercial Officer, and Pierre Houle, 
Treasurer, will review Air Canada's third quarter 2012 financial results and 
be available to answer questions from analysts and high yield bond holders.

Dial (416) 695-9706 or 1-866-225-0198 or listen (only) through our live audio 
web cast at http://bellwebcasting.ca/audience/index.asp?eventid=95158021.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

This press release includes forward-looking statements within the meaning of 
applicable securities laws. Forward-looking statements relate to analyses and 
other information that are based on forecasts of future results and estimates 
of amounts not yet determinable. These statements may involve, but are not 
limited to, comments relating to preliminary results, guidance, strategies, 
expectations, planned operations or future actions. Forward-looking 
statements are identified by the use of terms and phrases such as 
"preliminary", "anticipate", "believe", "could", "estimate", "expect", 
"intend", "may", "plan", "predict", "project", "will", "would", and similar 
terms and phrases, including references to assumptions.

Forward-looking statements, by their nature, are based on assumptions, 
including those described herein and are subject to important risks and 
uncertainties. Forward-looking statements cannot be relied upon due to, 
amongst other things, changing external events and general uncertainties of 
the business. Actual results may differ materially from results indicated in 
forward-looking statements due to a number of factors, including without 
limitation, industry, market, credit and economic conditions, the ability to 
reduce operating costs and secure financing, pension issues, energy prices, 
employee and labour relations, currency exchange and interest rates, 
competition, war, terrorist acts, epidemic diseases, environmental factors 
(including weather systems and other natural phenomena and factors arising 
from man-made sources), insurance issues and costs, changes in demand due to 
the seasonal nature of the business, supply issues, changes in laws, 
regulatory developments or proceedings, pending and future litigation and 
actions by third parties as well as the factors identified throughout this 
news release and those identified in section 18 "Risk Factors" of Air Canada's 
2011 MD&A dated February 9, 2012 and section 14 "Risk Factors" of Air Canada's 
Third Quarter 2012 MD&A dated November 8, 2012. The forward-looking 
statements contained in this news release represent Air Canada's expectations 
as of the date of this news release (or as of the date they are otherwise 
stated to be made), and are subject to change after such date. However, Air 
Canada disclaims any intention or obligation to update or revise any 
forward-looking statements whether as a result of new information, future 
events or otherwise, except as required under applicable securities 
regulations.


Highlights

The financial and operating highlights for Air Canada for the periods 
indicated are as follows.
                                             
                        Third Quarter              First Nine Months

(Canadian
dollars in
millions,
except where
indicated)      2012      2011   Change $     2012      2011   Change $

Financial
Performance
Metrics                                                                

Operating
revenues       3,328     3,242         86    9,279     8,913        366

Operating
income           421       270        151      391       277        114

Non-operating
income
(expense)          8     (394)        402    (212)     (467)        255

Income (loss)
before income
taxes            429     (124)        553      179     (190)        369

Net income
(loss) from
continuing
operations       429     (124)        553      178     (189)        367

Net income
(loss) from
discontinued
operations -
Aveos              -         -          -     (55)         -       (55)

Net income
(loss)           429     (124)        553      123     (189)        312

Adjusted net
income ((1))     230       193         37       59        45         14

Operating
margin (%),
excluding the
impact of
benefit plan
amendments (
(2))            8.9%      8.3%     0.6 pp     2.9%      3.1%   (0.2) pp

Operating
margin %       12.7%      8.3%     4.4 pp     4.2%      3.1%     1.1 pp

EBITDAR,
excluding the
impact of
benefit plan
amendments (
(2) (3))         554       535         19    1,043     1,080       (37)

EBITDAR ((3))    678       535        143    1,167     1,080         87

EBITDAR
margin (%),
excluding the
impact of
benefit plan
amendments (
(2) (3))       16.6%     16.5%     0.1 pp    11.2%     12.1%   (0.9) pp

EBITDAR
margin %(
(3))           20.4%     16.5%     3.9 pp    12.6%     12.1%     0.5 pp

Cash, cash
equivalents
and
short-term
investments    2,196     2,179         17    2,196     2,179         17

Free cash
flow( (4))     (164)         4      (168)      204       435      (231)

Adjusted net
debt ((5))     4,268     4,645      (377)    4,268     4,645      (377)

Net income
(loss) per
share -
diluted        $1.54   ($0.45)      $1.99    $0.63   ($0.70)      $1.33

Adjusted net
income per
share -
diluted( (1))  $0.82     $0.68      $0.14    $0.21     $0.16      $0.05
                                                                       

Operating
Statistics                       Change %                      Change %

Revenue
passenger
miles
(millions)
(RPM)         16,258    16,126        0.8   43,072    42,158        2.2

Available
seat miles
(millions)
(ASM)         18,835    18,799        0.2   51,785    51,170        1.2

Passenger
load factor %  86.3%     85.8%     0.5 pp    83.2%     82.4%     0.8 pp

Passenger
revenue per
RPM ("Yield")
(cents)         18.4      18.1        1.6     18.8      18.5        2.0

Passenger
revenue per
ASM ("RASM")
(cents)         15.9      15.5        2.2     15.7      15.2        2.9

Operating
revenue per
ASM (cents)     17.7      17.2        2.4     17.9      17.4        2.9

Operating
expense per
ASM ("CASM")
(cents)         15.4      15.8      (2.4)     17.2      16.9        1.7

Adjusted CASM
(cents) ((6))   10.7     10.6         1.6     11.6      11.4        2.0

Average
number of
full-time
equivalent
(FTE)
employees
(thousands) (
(7))            24.0      23.9        0.2     24.0      23.7        1.2

Aircraft in
operating
fleet at
period end(
(8))             352       353      (0.3)      352       353      (0.3)

Average fleet
utilization
(hours per
day)( (9))      11.0      10.8        1.5     10.4      10.3        0.4

Revenue
frequencies
(thousands)      148       147        0.8      423       418        1.3

Average
aircraft
flight length
(miles) ((9))    925       931      (0.6)      899       903      (0.4)

Economic fuel
cost per
litre 
(cents) (
(10))           87.8      85.8        2.3     90.0      84.1        7.0

Fuel litres 
(millions) (
(9))           1,104     1,103        0.1    3,052     3,025        0.9

Revenue
passengers
carried
(millions) (
(11))            9.8       9.5        2.5     26.7      26.0        2.8

(1)  Adjusted net income (loss) and adjusted net income (loss) per
     share - diluted are non-GAAP financial measures.  Refer to section
     16 "Non-GAAP Financial Measures" of Air Canada's Third Quarter
     2012 MD&A dated November 8, 2012 for additional information.

(2)  In the third quarter of 2012, Air Canada recorded an operating
     expense reduction of $124 million related to changes to the terms
     of the ACPA collective agreement pertaining to retirement age. 

(3)  EBITDAR (earnings before interest, taxes, depreciation,
     amortization and impairment, and aircraft rent), excluding the
     impact of benefit plan amendments, and EBITDAR are non-GAAP
     financial measures.  Refer to section 16 "Non-GAAP Financial
     Measures" of Air Canada's Third Quarter 2012 MD&A dated November
     8, 2012 for additional information.

(4)  Free cash flow (cash flows from operating activities less
     additions to property, equipment and intangible assets) is a
     non-GAAP financial measure. Refer to section 7.5 of Air Canada's
     Third Quarter 2012 MD&A dated November 8, 2012 for additional
     information.

(5)  Adjusted net debt (total debt less cash, cash equivalents and
     short-term investments plus capitalized operating leases) is a
     non-GAAP financial measure.  Refer to section 7.3 of Air Canada's
     Third Quarter 2012 MD&A dated November 8, 2012 for additional
     information.

(6)  Adjusted CASM is a non-GAAP financial measure.  Refer to section
     16 "Non-GAAP Financial Measures" of Air Canada's Third Quarter
     2012 MD&A dated November 8, 2012 for additional information.

(7)  Reflects FTE employees at Air Canada.  Excludes FTE employees at
     third party carriers (such as at Jazz Aviation LP ("Jazz"))
     operating under capacity purchase agreements with Air Canada.

(8)  Includes Jazz aircraft covered under the capacity purchase
     agreement with Jazz ("Jazz CPA") and aircraft operated by third
     party carriers operating under capacity purchase agreements. 
     Refer to section 6 of Air Canada's Third Quarter 2012 MD&A dated
     November 8, 2012 for additional information on Air Canada's
     operating fleet.

(9)  Excludes charter operations.  Also excludes third party carriers
     operating under capacity purchase arrangements, other than Jazz
     aircraft covered under the Jazz CPA.

(10) Excludes third party carriers, other than Jazz, operating under
     capacity purchase agreements. Includes fuel handling expenses.
     Economic fuel price per litre is a non-GAAP financial measure. 
     Refer to section 4 of Air Canada's Third Quarter 2012 MD&A dated
     November 8, 2012 for additional information.

(11) Consistent with the IATA definition of revenue passengers carried,
     revenue passengers are counted on a flight number basis.







Isabelle Arthur (Montréal)(514) 422-5788 Peter Fitzpatrick (Toronto)(416) 
263-5576 Angela Mah (Vancouver)(604) 270-5741

Internet:aircanada.com

SOURCE: AIR CANADA

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CO: AIR CANADA - CORPORATE - FINANCE
ST: Quebec
NI: AIR ERN CONF 

-0- Nov/08/2012 11:00 GMT


 
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