Air Canada Loss Widens: Rising fuel costs and pension charges hurt performance despite rise in passengers

The Wall Street Journal 
By DAVID GEORGE-COSH
February 17, 2017 8:10 a.m. ET


Air Canada on Friday reported a bigger fourth-quarter loss as the country’s biggest airline was hit by rising fuel costs and pension charges despite a sharp increase in passengers.

Montreal-based Air Canada posted a fourth-quarter loss of 179 million Canadian dollars ($136 million), or 66 Canadian cents a share. Results came in above the C$116 million, or 40 Canadian cents, it lost a year earlier and below the 7 Canadian cents gain analysts polled by Thomson Reuters expected. The company’s adjusted net profit was C$36 million, or 14 Canadian cents a share, compared with a gain of C$117 million, or 41 Canadian cents a share, reported a year earlier.

Revenue rose 7.6% to C$3.42 billion, compared with C$3.39 billion analysts were expecting.

Fuel costs, which the airline incurs in U.S. dollars, were up 13% from a year earlier to C$688 million, while employment wages rose 7% to C$633 million. Air Canada also booked a one-time charge of C$91 million related to pension increases for its pilots.

Air Canada’s cost per available seat mile, excluding fuel costs and employee profit-sharing, was 11.4 Canadian cents, a decline of 6.1% from the same quarter last year. The airline’s load factor was 79.9% in the quarter, down from 81.1% in the same quarter last year. Air Canada flew 10.7 million passengers in the quarter, up from 9.7 million, the company said.

The airline expects its margin of earnings before interest, taxes, depreciation, amortization and aircraft rent in the first quarter of 2017 to be roughly half of what was reported in the same quarter last year. Air Canada’s adjusted cost per available seat mile is expected to decrease 3.25% to 4.75% next quarter when compared with the first quarter of 2016, the company said.

WestJet, Air Canada’s smaller rival, reported its fourth-quarter results last week. The airline reported a 13% decline in fourth-quarter earnings on rising fuel and maintenance costs, while revenue rose 6% to C$1.02 billion.

Original article can be found here:   https://www.wsj.com