Air Canada First-Quarter Loss Widens on Aveos, Fuel Costs

Air Canada (AC/A), the country’s largest carrier, posted a wider first-quarter loss as fuel expenses rose and it booked costs tied to the restructuring of a former maintenance unit now called Aveos Fleet Performance Inc.

The net loss was C$210 million ($212 million), or 76 cents a share, compared with C$19 million, or 7 cents, a year earlier, Montreal-based Air Canada said today in a statement. Revenue advanced 7.6 percent to C$2.96 billion.

Air Canada’s fuel bill rose 20 percent to C$889 million, and it booked costs of C$120 million tied to Aveos, which shut down and filed for insolvency protection March 19. The airline, whose parent sold control of the maintenance provider in 2007, was required to pay severance to as many as 1,500 workers.

“The quarter was marked by a challenging environment, with persistently high fuel prices and volatility,” Air Canada Chief Executive Officer Calin Rovinescu said in the statement.

The carrier paid an average of 91.6 cents for a liter of fuel, up 17 percent from a year earlier, it said in a filing.

Labor strife also had an impact, culminating in a sickout by pilots March 18 and a wildcat strike by mechanics and baggage handlers five days later. Canada’s government intervened to prevent stoppages as talks over collective agreements stalled, and earlier this week named arbitrators to resolve the disputes.

Bookings Hit

Operations “were disrupted by job action by a number of unionized employees, which resulted in a decline in bookings for travel originating in Canada in the immediate aftermath of these incidents,” Rovinescu said today. “Since then, we have seen an improvement in advance booking trends.”

Excluding some gains and costs, the adjusted first-quarter loss was 64 cents share, Air Canada said, beating the average 79-cent estimate from a Bloomberg survey of nine analysts. Earnings before interest, tax, depreciation, amortization and rent declined to C$175 million from C$207 million.

The results also reflect foreign-exchange gains of C$87 million, compared with gains of C$104 million a year ago.

Capacity will increase by as much as 1 percent in the second quarter, with the full-year figure expanding no more than 1.5 percent, the carrier said today.

Unit costs, excluding fuel and vacation packages, rose 1 percent in the quarter as Air Canada postponed some maintenance work. That’s less than the 4 percent to 5 percent increase that the company had forecast three months ago.

Air Canada now expects the measure to increase by between 0.5 percent and 1.5 percent in 2012, less than the range of 1 percent to 2 percent it projected three months ago.

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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