Air Canada Sees C$120 Million Aveos Costs in 1st Quarter

Air Canada (AC/A) said first-quarter results will include C$120 million ($121.7 million) in costs related to the restructuring of its former maintenance and repair unit now known as Aveos Fleet Performance Inc.

Earnings before interest, tax, depreciation, amortization and rent, a closely watched measure of profitability, will probably range between C$170 million and C$180 million for the period, the Montreal-based carrier said today in a statement. That compares with C$207 million a year earlier.

Montreal-based Aveos put about 2,600 employees out of work when it shut plants and filed for insolvency protection on March 19. Air Canada, the country’s largest airline, later said it may be required to pay severance to as many as 1,500 unionized Aveos workers. Air Canada parent ACE Aviation Holdings Inc. (ACE/A) sold control of the carrier’s technical services unit to a group of private-equity investors in 2007.

Cash and short-term investments amounted to C$2.25 billion as of March 31, Air Canada said in the statement. That’s C$135 million more than a year earlier.

All first-quarter figures are preliminary, haven’t been reviewed by Air Canada’s auditors and are subject to change, the company said today. Air Canada plans to release final first- quarter results May 4.

The company has sent several aircraft to both Canadian and international maintenance providers since Aveos closed. The carrier is working with a network of about 40 Canadian suppliers, in addition to unidentified international suppliers, for engines and aircraft components maintenance.

The carrier also said it’s looking for new suppliers to perform “longer-term” maintenance previously done by Aveos. Preference will be given to companies that have or will establish some portion of their operation in Montreal, Vancouver, Toronto and Winnipeg, Manitoba, the company said.

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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