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Air Canada Quarterly Loss Narrows on Cost Cuts, Higher Revenue

May 15 (Bloomberg) -- Air Canada, the nation’s largest airline, reported a narrower first-quarter loss than analysts projected with the help of a cost-savings plan and as revenue climbed faster than estimated.

Excluding some costs and gains, the loss narrowed to C$132 million ($121 million), or 46 cents a share, from C$143 million, or 52 cents, a year earlier, Montreal-based Air Canada said today in a statement. That beat the 48-cent average estimate in a Bloomberg survey of nine analysts. Revenue rose to C$3.07 billion, exceeding the C$3.04 billion average estimate.

Chief Executive Officer Calin Rovinescu is working to fend off the effects of a declining currency on jet fuel and other U.S.-dollar-denominated expenses through measures such as more favorable maintenance agreements and a surcharge on vacation packages. Canada’s dollar traded at 90.7 U.S. cents on average during the first quarter, 8.6 percent lower than a year earlier.

“Their cost reduction program is moving along, but they will probably have to increase their efforts if the Canadian dollar permanently stays at the current level,” Cameron Doerksen, an analyst at National Bank Financial in Montreal who rates Air Canada “sector perform,” said yesterday in a telephone interview. “That involves trying to raise fares and finding some more cost savings.”

The airline said today that it now expects its adjusted cost per available seat mile, or CASM, to decline 3 percent to 4 percent in the full year, compared with a previous forecast of a 2.5 percent to 3.5 percent drop.

“This expected improvement is largely due to lower aircraft maintenance and depreciation, amortization and impairment expenses than previously projected,” the company said.

Air Canada fell 0.8 percent to C$8.22 in Toronto yesterday. The stock has gained 11 percent this year, as Canada’s benchmark Standard & Poor’s/TSX Composite Index climbed 7.7 percent.

The carrier hasn’t reported a first-quarter profit since it returned to the stock market in late 2006, according to data compiled by Bloomberg.

“People generally fly less in the winter, so Q1 is typically the seasonally weakest quarter of the year for Air Canada,” Doerksen said. “I can’t think of a time when Air Canada ever made money in Q1.”

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

To contact the editors responsible for this story: David Risser at drisser@bloomberg.net Robert Valpuesta

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